5 MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS
The Corporate Governance and Nominating Committee is responsible for reviewing with our Board the appropriate size and composition of the Board. When considering the director nominees, our Board will look at a diverse pool of candidates. We view and define diversity in its broadest sense, which includes gender, ethnicity, age, education, experience and leadership qualities. The Corporate Governance and Nominating Committee reviews each candidate’s business or professional experience, demonstrated leadership ability, integrity and judgment, record of public service, diversity, financial and technological acumen and international experience before recommending a candidate to the Board. Below is a summary of the Board diversity for the directors who are standing for reelection.
Board Gender, Ethnicity, Independence, Tenure and Age Diversity
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GENDER
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ETHNICITY
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Three of our eight directors,
including the current chairs of the
Audit and Finance and HESCR Committees, are female.
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25% of our directors self-identify
as an ethnicity other than
Caucasian/White.
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INDEPENDENCE
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TENURE
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AGE
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The NYSE requires that independent directors must comprise the majority
of the Board. The Board has determined that each of the
nominees, other than Mr. Tillman,
meet the NYSE’s
independence standards.
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We believe the mix between short-
and long-tenured directors reflects
a balance of company experience
and new perspectives.
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The average age of the director nominees is 61 years.
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MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS 6
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BOARD SKILLS AND EXPERIENCE DIVERSITY MATRIX
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Our directors have a diversity of experience and skills that span a broad range of industries in the public and not-for-profit sectors. They bring to our Board a wide variety of skills, qualifications and viewpoints that strengthen our Board’s ability to carry out its oversight role on behalf of our stockholders. The table below summarizes key qualifications, skills and attributes each director that is standing for reelection brings to our Board. The lack of a mark for a particular item does not mean the director does not possess that qualification or skill. However, a mark indicates a specific area of focus or expertise that the director brings to our Board. More details on each director’s qualifications, skills and attributes are included in the director biographies on the subsequent pages.
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Tillman
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Deaton
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Donadio
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Few
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Hyland
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Ladhani
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Smolik
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Wells
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Public Company CEO
Experience working as a CEO of a public company
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Financial Oversight/Accounting
Senior executive level experience in financial accounting and reporting, auditing, corporate financing and/or internal controls or experience in the financial services
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E&P Industry Experience
Experience as executives or directors in, or in other leadership positions working with, the exploration and production industry
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Engineering Expertise
Expertise through relevant undergraduate or graduate in engineering disciplines
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Public Policy/Regulatory
Experience in or a strong understanding of the regulatory issues facing the oil and gas industry and public policy on a local, state and national level
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HES Experience
Experience in managing matters related to health, environmental, safety and social responsibility in executive and operating roles
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International
Global business or international experience
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Information Technology
Experience in or strong understanding of the information technology and cyber-security issues facing the oil and gas industry
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Risk Management
Executive experience managing risk
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Outside Public Boards
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7 MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH NOMINEE
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Chadwick C. Deaton
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BUSINESS EXPERIENCE
» Former Executive Chairman and Chairman, Baker Hughes Incorporated, an oilfield services company, Houston, TX (Executive Chairman 2012-2013 and Chairman 2004-2012)
» Chief Executive Officer, Baker Hughes (2004-2011)
» President, Baker Hughes (2008-2010)
» President and Chief Executive Officer, Hanover Compressor Company (2002-2004)
» Senior Advisor to Schlumberger Oilfield Services (1999-2001)
» Executive Vice President, Schlumberger Oilfield Services (1998-1999)
OTHER CURRENT POSITIONS
» Board Member, Ariel Corporation, a private company
» Board Member, Piri Technologies, a private company
» Board Member, University of Wyoming Foundation
» Member, Society of Petroleum Engineers
» Wyoming Governor’s Engineering Task Force
EDUCATION
» B.S. (geology), University of Wyoming
Mr. Deaton’s over 30 years of executive and management experience in the energy business, including over 15 years of senior executive experience in the oilfield services industry, provides him valuable knowledge, experience and management leadership regarding many of the same issues that we face as a publicly traded company in the oil and gas industry. His service on the boards of other publicly traded companies has provided him exposure to different industries and approaches to governance.
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Former Executive Chairman, Chairman and CEO, Baker Hughes Incorporated
Age: 68
Director since: 2014
Committees:
COMP, CGN, HESCR
Current Public Company Boards:
Air Products and Chemicals, Inc. (Independent Lead Director)
Transocean Ltd. (Chairman)
Public Company Boards During the Past 5 Years:
CARBO Ceramics Inc.
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Marcela E. Donadio
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BUSINESS EXPERIENCE
» Former Partner, Ernst & Young LLP, a multinational professional services firm, Houston, TX (1989-2014)
» Americas Oil & Gas Sector Leader, Ernst & Young LLP (2007-2014)
» Audit Partner for multiple oil & gas companies, Ernst & Young LLP (1989-2014)
» Joined Ernst & Young LLP in 1976 and served in positions of increasing responsibility, including various energy industry leadership positions
OTHER CURRENT POSITIONS
» Board Member, Theatre Under the Stars
» Member, Corporation Development Committee, Massachusetts Institute of Technology
» Member of National Board, LSU Foundation
» Board Member, Houston Food Bank
EDUCATION
» B.S. (accounting), Louisiana State University
Ms. Donadio has audit and public accounting experience with a specialization in domestic and international operations in all segments of the energy industry, and is a licensed certified public accountant in the State of Texas. Her comprehensive knowledge of public company financial reporting regulations and compliance requirements contributes valuable expertise to our Board. She also has a deep understanding of the strategic issues affecting companies in the oil and gas industry. In addition, her extensive audit and public accounting experience in the energy industry, both domestic and international, uniquely qualifies her to serve as a member of our Audit and Finance Committee. The Board has determined that she qualifies as an “Audit Committee Financial Expert” under the SEC rules based on these attributes, education and experience.
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Former Partner, Ernst & Young LLP
Age: 66
Director since: 2014
Independent Lead Director: effective as of May 26, 2021
Committees:
AFC (financial expert), COMP, HESCR
Current Public Company Boards:
NOV Inc., formerly National Oilwell Varco, Inc.
Norfolk Southern Corporation
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MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS 8
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Jason B. Few
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BUSINESS EXPERIENCE
» President, CEO and Chief Commercial Officer, FuelCell Energy, Inc., a global leader in molten carbonate fuel cell technology focused on enabling a world empowered by clean energy (since 2019)
» President and Director, Sustayn, L.L.C., a privately held cloud-based waste and recycling optimization company (2018-2019)
» Founder and Senior Managing Partner, BJF Partners, L.L.C., a privately held strategic transformation consulting firm (since 2016)
» Senior Advisor, Verve Industrial Protection, a privately held software company (since 2016)
» President and CEO and Director, Continuum Energy, an energy products and services company (2013-2016)
» President, Reliant Energy and EVP & Chief Customer Officer, NRG (2008-2012)
OTHER CURRENT POSITIONS
» Board Member, Memorial Hermann Healthcare System
» Board Member and past Chairman, American Heart Association
EDUCATION
» BBA (computer systems in business), Ohio University School of Business
» MBA, Northwestern University, J.L. Kellogg
Mr. Few’s broad understanding of advanced technologies, combined with his extensive energy industry experience adds valuable insight to our Company. His service on other publicly traded company boards has given him exposure to a variety of industries and approaches.
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President, CEO and Chief Commercial Officer, FuelCell Energy, Inc.
Age: 54
Director since: 2019
Committees:
AFC, CGN
Current Public Company Boards:
FuelCell Energy, Inc.
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M. Elise Hyland
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BUSINESS EXPERIENCE
» Former Senior Vice President, EQT Corporation and Senior Vice President and Chief Operating Officer, EQT Midstream Services, LLC (2017-2018)
» Executive Vice President of Midstream Operations and Engineering, EQT Midstream Services, LLC (2013-2017)
» President of Commercial Operations, EQT Midstream Services, LLC (2010-2013)
» President of Equitable Gas Company, a previously owned entity of EQT (2007-2010)
» Joined EQT Corporation in 2000 and served in positions of increasing responsibility in finance, strategic planning and customer service
» Joined Alcoa, Inc. in 1980 and held roles of increasing responsibility in research, materials and business development leading to her appointment as Manager of the Alloy Design Group at Alcoa Research Laboratories
OTHER CURRENT POSITIONS
» Director, Washington Gas Light Company, a private company
EDUCATION
» MBA, Tepper School of Business at Carnegie-Mellon University
» M.S. and B.S. (Metallurgical Engineering and Materials Science), Carnegie-Mellon University
Ms. Hyland has over 15 years of executive level management in both the midstream and manufacturing industries. Through her strong engineering background and leadership, she brings commercial acumen and valuable insight into marketing fundamentals and key issues our Company faces as a publicly traded company in the oil and gas industry.
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Former Senior Vice President, EQT Corporation
Age: 61
Director since: 2018
Committees:
AFC, HESCR
Current Public Company Boards:
Entergy Corporation
Public Company Boards During the Past 5 Years:
EQT Midstream Partners, LP
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9 MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS
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Holli C. Ladhani
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BUSINESS EXPERIENCE
» Former President and CEO of Select Energy (2017-2021)
» Chairman, President and CEO, Rockwater Energy Solutions (2017); CEO, Rockwater (2015-2017)
» Joined Rockwater in 2011 and served in positions of increasing responsibility, including Executive Vice President, Chemical Technologies and CFO
» Executive Vice President and CFO, Dynegy Inc. (2005-2011)
» Joined Dynegy in 2000 and served in positions of increasing responsibility including Senior Vice President, Treasurer and Controller
» Joined PricewaterhouseCoopers LLP in 1992 and served in positions of increasing responsibility, including audit department senior manager
OTHER CURRENT POSITIONS
» Board of Trustees, Rice University
» Member, Junior Achievement of Southeast Texas
EDUCATION
» B.A. in Accounting from Baylor University
» M.B.A. (Jones Scholar) from Rice University
Ms. Ladhani’s financial expertise and extensive knowledge of our industry and business provides leadership to our management team and provides the Board with valuable insight. In addition, her executive level experience brings a deep understanding of risk assessment to the boardroom.
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Former President and CEO, Select Energy
Age: 50
Director since: 2021
Committees:
AFC (financial expert), HESCR
Public Company Boards During Past 5 Years:
Select Energy
Noble Energy
Atlantic Power
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Brent J. Smolik
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BUSINESS EXPERIENCE
» Former President and Chief Operating Officer of Noble Energy (2018-2020)
» Chairman, Chief Executive Officer and President, EP Energy Corporation (2012-2017)
» President, El Paso Exploration and Production Company (2006-2012)
» President, ConocoPhillips Canada and Burlington Resources Canada (2004-2006)
» Joined Burlington Resources in 1990 and served in positions of increasing responsibility in engineering and asset management until 2004
» Joined Atlantic Richfield in 1984 and held roles of increasing responsibility in drilling, completion and reservoir engineering until 1990
OTHER CURRENT POSITIONS
» Advisory Board Member, Texas A&M Dwight Look College of Engineering
» Advisory Board Member, Advancing Women Executives in Energy
EDUCATION
» B.S. (Petroleum Engineering), Texas A&M University
Mr. Smolik has over 35 years of leadership, operating and technical experience in the oil and gas industry and brings competencies in strategy, execution and risk management. As a result of his management and board tenures, he also provides valuable insight on governance, governmental affairs and regulatory matters.
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Former President and COO, Noble Energy
Age: 59
Director since: 2021
Committees:
AFC, CGN
Public Company Boards During the Past 5 Years:
EP Energy Corporation
Cameron International
Noble Midstream Partners
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MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS 10
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Lee M. Tillman
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BUSINESS EXPERIENCE
» Chairman (2019-present), Director (2013-2019), President and Chief Executive Officer of Marathon Oil Corporation, Houston, TX (2013-present)
» Vice President of Engineering, ExxonMobil Development Company, 2010-2013
» North Sea Production Manager and Lead Country Manager, ExxonMobil subsidiaries in Stavanger, Norway, 2007-2010
» Acting Vice President, ExxonMobil Upstream Research Company, 2006-2007
» Joined Exxon Corporation in 1989 as a research engineer and served in positions of increasing responsibility
OTHER CURRENT POSITIONS
» Board Member, American Heart Association
» Board Member, American Petroleum Institute
» Board Member, American Exploration & Production Council
» Member, Engineering Advisory Council and Chemical Engineering Advisory Council of Texas A&M University
» Member, National Petroleum Council
» Member, Society of Petroleum Engineers
» Member, Celebration of Reading Committee within the Barbara Bush Houston Literacy Foundation
» Emeritus Board Member, Spindletop Charities
EDUCATION
» B.S. (chemical engineering), Texas A&M University
» Ph.D. (chemical engineering), Auburn University
As our Chairman, President and CEO, Mr. Tillman sets our Company’s strategic direction under the Board’s guidance. He has extensive knowledge and experience in global operations, project execution and leading edge technology in the oil and gas industry gained through his executive and management positions with our Company and ExxonMobil. His knowledge and hands-on experience with the day-to-day issues affecting our business provide the Board with invaluable information necessary to direct the business and affairs of our Company.
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Chairman (since 2019), President and CEO of Marathon Oil Corporation
Age: 59
Director since: 2013
Chairman since: 2019
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J. Kent Wells
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BUSINESS EXPERIENCE
» Former Chief Executive Officer and President, Fidelity Exploration & Production Company, an oil and natural gas production company (2011-2015) and Vice Chairman of MDU Resources, the parent company of Fidelity (2013-2015)
» Senior Vice President, BP America (2007-2011)
» General Manager, Abu Dhabi Company for Onshore Oil Operations (2005-2007)
» Vice President, BP America (Rockies 2000-2002 and Gulf of Mexico 2002-2005)
» General Manager, Crescendo Resources LLC (1997-2000)
» Joined Amoco Canada in 1979 and progressed through a number of technical and operating positions with increasing scope and responsibility. Lived and worked in three different countries with the majority of his experience being the U.S. onshore business.
EDUCATION
» BS (mechanical engineering), Queen’s University
Mr. Wells has more than 35 years of experience in the oil and gas industry. Through his CEO, President and General Manager roles he brings competencies and perspective on strategy, operations, technology, regulatory, finance and M&A. Having previously served on two publicly traded company boards, whose business included U.S. onshore shale plays, he brings insight into governance and risk management matters associated with these assets.
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Former CEO and President, Fidelity Exploration & Production Company and Vice Chairman of MDU Resources, the parent company of Fidelity
Age: 64
Director since: 2019
Committees:
COMP, HESCR
Public Company Boards During the Past 5 Years:
Newfield Exploration Company
MDU Resources
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11 MARATHON OIL | PROPOSAL 1: ELECTION OF DIRECTORS
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Proposal 1
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For the reasons stated above, your Board of Directors recommends a vote FOR Proposal 1 electing each nominee standing for election as a director.
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Our business and affairs are managed under the direction of our Board, which met 12 times in 2020. Aggregate attendance for Board and committee meetings was over 98% for the full year. No director attended less than 91% of Board or committee meetings in 2020. Under our Corporate Governance Principles, directors are expected to attend the Annual Meeting. Our 2020 Annual Meeting was held virtually. All of our directors nominated at the 2020 Annual Meeting attended the meeting via the Virtual Shareholder Meeting platform.
Our Corporate Governance Principles require our non-employee directors to meet at regularly scheduled executive sessions. An offer of an executive session is extended to non-employee directors at each regularly scheduled Board meeting. In 2020, the directors had ten executive sessions and the non-employee directors held five independent executive sessions.
A significant portion of our Board’s oversight responsibilities is carried out through our four standing committees, each of which is comprised solely of independent non-employee directors.
Our four standing committees are the Audit and Finance Committee, the Compensation Committee, the Corporate Governance and Nominating Committee and the Health, Environmental, Safety and Corporate Responsibility Committee.
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COMMITTEE
CHARTERS
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COMMITTEE
COMPOSITION
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COMMITTEE
OPERATIONS
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Each committee’s written charter, adopted by our Board, is available on our website at www.marathonoil.com under About—Board of Directors—Committees and Charters.
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Each committee is comprised solely of independent directors as defined under the rules of the NYSE. All members of the Audit and Finance and Compensation Committees meet the additional independence standards under the Securities Exchange Act of 1934 (Exchange Act) Rule 10A-3.
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Each committee reports its actions and recommendations to the Board, receives reports from senior leadership, annually evaluates its performance and has the authority to retain outside advisors. Committee chairs have the opportunity to call for executive sessions at each meeting.
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The following tables show each committee’s current membership, principal functions and number of meetings in 2020, including in-person, virtual and telephonic meetings.
MARATHON OIL | GOVERNANCE 12
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AUDIT AND FINANCE
Marcela E. Donadio
Chair
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Members: 6 Independent: 6 2020 Meetings: 6*
Audit Committee Financial Experts: 2
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* The Committee met with the Company’s internal audit organization and independent auditor at 4 of the meetings, without management present.
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Key Oversight Responsibilities:
» Appoints, approves compensation for and oversees the work of the independent auditor.
» Reviews and approves in advance all audit, audit-related, tax and permissible non-audit services to be performed by the independent auditor.
» Meets separately with the independent auditor, the internal auditors and management with respect to the status and results of their activities annually reviewing and approving the audit plans.
» Reviews, evaluates and assures the rotation of the lead audit partner.
» Reviews with management, and if appropriate the internal auditors, our disclosure controls and procedures and management’s conclusions about their efficacy.
» Reviews, approves, where applicable, and discusses with management, the independent auditor and the internal auditors, as appropriate, the annual and quarterly financial statements, earnings press releases, reports of internal control over financial reporting and the annual report.
» Discusses with management guidelines and policies for risk assessment and management.
» Reviews and recommends to our Board dividends, certain financings, loans, guarantees and other uses of credit.
» Reviews codes of conduct and compliance activities.
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Members:
Marcela E. Donadio*, Chair
Gregory H. Boyce
Jason B. Few
M. Elise Hyland
Holli C. Ladhani*†
Brent J. Smolik††
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* Audit Committee Financial Expert (as defined under the Securities and Exchange Commission’s (SEC) rules), in each case as determined by the Board.
† Ms. Ladhani joined the Audit and Finance Committee in 2021 and will become the Chair of the Committee following the Annual Meeting.
†† Mr. Smolik joined the Audit and Finance Committee in 2021.
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COMPENSATION
Douglas L. Foshee
Chair
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Members: 5 Independent: 5 2020 Meetings: 7
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Key Oversight Responsibilities:
» Reviews and recommends to our Board all matters of policy and procedure relating to executive officer compensation.
» Reviews and approves corporate philosophy, goals and objectives relevant to the CEO’s compensation, and determines and recommends to the independent directors for approval the CEO’s compensation level based on our Board’s performance evaluation.
» Determines and approves the compensation of the other executive officers and reviews the executive officer succession plan.
» Administers our incentive compensation plans and equity-based plans and confirms the certification of the achievement of performance levels under our incentive compensation plans.
» Engages and oversees external independent compensation consultant.
» Reviews with management and recommends for inclusion in our annual Proxy Statement our Compensation Discussion and Analysis.
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Members:
Douglas L. Foshee†, Chair
Gregory H. Boyce
Chadwick C. Deaton
Marcela E. Donadio
J. Kent Wells
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† Following the Annual Meeting, Mr. Few will join the Compensation Committee and become the Chair.
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13 MARATHON OIL | GOVERNANCE
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CORPORATE GOVERNANCE AND NOMINATING
Chadwick C. Deaton
Chair
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Members: 5 Independent: 5 2020 Meetings: 5
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Key Oversight Responsibilities:
» Reviews and recommends to our Board the appropriate size and composition of our Board, including candidates for election or re-election as directors, the criteria to be used for the selection of director candidates, the composition and functions of our Board committees and all matters relating to the development and effective functioning of our Board.
» Reviews and recommends to our Board each committee’s membership and chair, including a determination of whether one or more Audit and Finance Committee members qualifies as a “financial expert” under applicable law.
» Assesses and recommends corporate governance practices, including reviewing and recommending to our Board certain governance policies.
» Oversees the evaluation process of our Board and all committees.
» Reviews and, if appropriate, approves related person transactions.
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Members:
Chadwick C. Deaton, Chair
Gregory H. Boyce
Jason B. Few
Douglas L. Foshee
Brent J. Smolik†
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† Mr. Smolik joined the Corporate Governance and Nominating Committee in 2021.
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HEALTH, ENVIRONMENTAL, SAFETY AND CORPORATE RESPONSIBILITY
M. Elise Hyland
Chair
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Members: 5 Independent: 5 2020 Meetings: 2
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Key Oversight Responsibilities:
» Reviews and recommends Company policies, programs and practices concerning broad health, environmental, climate change, safety, social, public policy and political issues.
» Identifies, evaluates and monitors health, environmental, safety, social, public policy and political trends and issues and concerns that could affect the Company’s business activities and performance.
» Reviews legislative and regulatory issues affecting our businesses and operations.
» Reviews our political, charitable and educational contributions.
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Members:
M. Elise Hyland, Chair
Chadwick C. Deaton
Marcela E. Donadio
Holli C. Ladhani†
J. Kent Wells
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† Ms. Ladhani joined the Health, Environmental, Safety and Corporate Responsibility Committee in 2021.
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BOARD OVERVIEW
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» Chairman of the Board and Chief Executive Officer: Lee M. Tillman
» Independent Lead Director: On March 17, 2021, the Board announced that Marcela E. Donadio would succeed Gregory H. Boyce, effective May 26, 2021
» Active engagement by all directors
» 7 of our 8 director nominees are independent
» All members of the Audit and Finance Committee, Compensation Committee, Corporate Governance and Nominating Committee and Health, Environmental, Safety and Corporate Responsibility Committee are independent
Our Board believes that continuing to combine the position of Chairman and CEO is in the best interest of our Company at this time.
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BOARD LEADERSHIP STRUCTURE
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We believe that independent Board oversight is essential. Our Board does not have a policy regarding whether the roles of the Chairman and CEO should be separate, but rather makes this determination on the basis of what is best for our Company at a given point in time.
Our Corporate Governance Principles require that non-employee directors, all of whom are independent, meet at regularly scheduled executive sessions without the CEO present. The Independent Lead Director presides at these meetings. In addition, our Corporate Governance Principles require that all our principal committees be comprised of entirely independent directors. On March 17, 2021, the Board announced that Marcela E. Donadio would succeed Gregory H. Boyce as Independent Lead Director, effective May 26, 2021.
MARATHON OIL | GOVERNANCE 14
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INDEPENDENT DIRECTOR LEADERSHIP
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As Independent Lead Director, Mr. Boyce is and Ms. Donadio will be, responsible for:
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» presiding at independent executive sessions of independent directors;
» reviewing with Mr. Tillman the proposed Board and committee meeting agendas;
» serving as a liaison between the independent directors and Mr. Tillman in discussing issues from the
independent executive sessions and ensuring the flow of information;
» reviewing and recommending to Mr. Tillman the retention of consultants who report directly to our Board
or committees thereof;
» overseeing Board performance; and
» establishing effective communications with stakeholder groups.
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BOARD AND COMMITTEE EVALUATIONS
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Each year, our Board performs a rigorous full Board evaluation. In addition, each committee also performs an annual evaluation. The evaluation process is managed by the Corporate Secretary’s office with oversight from the Corporate Governance and Nominating Committee. In 2020, the evaluation process consisted of:
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Independent External Board Evaluation - each director completed a formal questionnaire administered by an independent third party to gain additional perspective on the culture of the Board.
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Evaluation questionnaires - each director and committee member completed a formal questionnaire. This allows each director and committee member to identify potential improvements.
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Individual Discussions - our Independent Lead Director met with each director individually to solicit feedback and have an in-depth conversation.
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Board and committee discussions - the Board and each committee met in Executive Session to discuss the results of the evaluation questionnaires.
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Independent Lead Director feedback to Board and Chairman - the Independent Lead Director communicated the feedback to the Board from the internal evaluations and the Board reviewed the external independent culture evaluation. The Independent Lead Director also met separately with the Chairman to review feedback.
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Implementation of feedback - as a result of the evaluation process, the Board has implemented changes to the Board and committee meetings, including updates to the evaluation process and bringing on additional directors.
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OUR BOARD’S ROLE IN RISK OVERSIGHT
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While our Board and its committees oversee risk management, Company management is responsible for the day-to-day management of risk. We have a robust enterprise risk management process for identifying, assessing and managing risk and monitoring risk mitigation strategies. Our CEO and CFO and a committee of executive officers and senior managers work across the business to manage each enterprise level risk and to identify emerging risks. Our Board annually reviews our enterprise risk management process and the latest assessment of risks and key mitigation strategies. Responsibility for risk oversight by our Board and its committees is delegated as set forth below:
» The Audit and Finance Committee receives regular updates from senior leadership on specific risks identified in the risk management process. These reviews with senior leadership include risks associated with financial and accounting matters and reporting, and operational risks, including cyber-security. The Audit and Finance Committee also monitors compliance with legal and regulatory requirements and internal control systems, and reviews risks associated with financial strategies and the Company’s capital structure. Protecting the privacy of our systems and networks has long been and will continue to be a priority. The Audit and Finance Committee is committed to maintaining strong and meaningful privacy and security protections. Our Senior Vice President, Technology, Innovation and Chief Information Officer regularly provides reports to senior leadership and the Audit and Finance Committee regarding our ongoing assessment of cyber-security threats and risks, data security programs designed to prevent and detect threats, attacks, incursions and breaches, as well as management, mitigation and remediation of potential, and any actual, cyber-security and information technology risks and breaches. In addition, the Audit and Finance Committee and management review reports from internal audit regarding evaluation of our information technology department on a regular basis.
15 MARATHON OIL | GOVERNANCE
» The Corporate Governance and Nominating Committee reviews the Board’s and Company’s governance policies and procedures to ensure adherence to best practices and legal requirements. The Corporate Governance and Nominating Committee also reviews director succession planning and committee assignments to ensure the directors’ skills and backgrounds are utilized to the best interests of the Company.
» The Compensation Committee reviews the executive compensation program to ensure it does not encourage excessive risk-taking. It also reviews our executive compensation, incentive compensation and succession plans to ensure we have appropriate practices in place to support the retention and development of the talent necessary to achieve our business goals and objectives.
» The Health, Environmental, Safety and Corporate Responsibility Committee regularly reviews and oversees operational risks, including those relating to health, environment, safety, security and climate change. It reviews risks associated with social, political and environmental trends, issues and concerns, domestic and international, which affect or could affect our business activities, performance and reputation.
» Our Board receives regular updates from the committees about these activities, and reviews additional risks not specifically within the purview of any particular committee and risks of a strategic nature. Key risks associated with the strategic plan are reviewed annually at our Board’s strategy meeting and periodically throughout the year.
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RISK ASSESSMENT RELATED TO OUR COMPENSATION STRUCTURE
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The Compensation Committee regularly evaluates and considers the role of executive compensation programs in ensuring that our executive officers are incentivized to only take appropriate and prudent risks, and that compensation opportunities do not motivate excessive risk-taking. The practices we employ include:
» All executive officer compensation decisions are made by either the Compensation Committee, which is comprised solely of independent directors, and/or by the independent directors for CEO compensation level.
» The Compensation Committee is advised by an independent compensation consultant that performs no other work for executive management or our Company.
» Our executives do not have employment agreements.
» The Compensation Committee manages our compensation programs to be competitive with those of peer companies and also monitors our programs against trends in executive compensation on an annual basis against the broader oil and gas industry and general industry of similar market capitalization.
» Our compensation programs are intended to balance short-term and long-term incentives.
» Our long-term incentives feature multiple award vehicles and multi-year vesting criteria aligned with long-term ownership, and our executive officers are also subject to ongoing stock ownership requirements.
» Our annual cash bonus program is based on a balanced set of multiple objective metrics. In addition, the Compensation Committee generally considers the achievement of individual performance goals and overall corporate performance.
» Annual cash bonuses are paid to executive officers only after the Audit and Finance Committee has reviewed audited financial statements for the performance year.
» Annual cash bonuses and performance share unit awards are subject to a maximum opportunity.
» The Compensation Committee regularly evaluates share utilization in our 2019 Incentive Compensation Plan by reviewing overhang levels (dilutive impact of equity compensation on our stockholders) and annual run rates (the aggregate shares awarded as a percentage of total outstanding shares).
» Our clawback policy applies to annual cash bonuses and is generally triggered with respect to an executive officer in the event of a material accounting restatement due to noncompliance with financial reporting requirements or an act of fraud by that executive officer. Our long-term incentive awards for executive officers have similar provisions.
MARATHON OIL | GOVERNANCE 16
Our 2020 compensation program for our named executive officers followed the above risk assessment. See "Compensation Discussion and Analysis" section for additional details.
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HEALTH, ENVIRONMENTAL, SAFETY AND CORPORATE RESPONSIBILITY
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Managing Risk to Operate Responsibly
Our Board’s key oversight role includes reviewing the sustainability of our enterprise and the strength of our risk management efforts. As mentioned above, our four standing committees assist with this oversight. The Health, Environmental, Safety and Corporate Responsibility Committee plays a vital role in our reviewing our operational risks, including those relating to health, environment, safety, security and climate change and includes directors with experience in this area.
Minimizing Our Environmental Impact
Environmentally responsible, compliant operations are central to our company values. We actively work to mitigate our operational impacts on the air, water and sensitive habitats and reduce our environmental footprint. We strive to go above and beyond regulatory requirements and invest in environmental performance to achieve this goal.
» Climate Change Risk - We recognize the impact of greenhouse gas (GHG) and other air emissions on global climate and air quality. We work to reduce our emissions and to mitigate current and future transition risks to our business. In addition, we have and intend to continue to make investments in technologies and processes to drive improvement. Our corporate scorecard sets forth metrics and targets that incentivize achieving our goals and are linked to executive and employee pay, such as a climate-related metric added in 2020.
» Reducing air emissions from our operations - We believe we have a history of taking proactive measures to reduce emissions, including phasing out high-bleed pneumatic controllers, monitoring manual liquids unloading operations and detecting and repairing leaks. Reducing the GHG emissions intensity of our operations is central to our climate risk mitigation strategy and we prioritize lowering methane intensity because of its outsized environmental impact. We continue to evaluate emissions reduction technologies that address the specific needs and constraints of each of our assets.
» Applying water stewardship practices - We practice responsible water sourcing, conservation, reuse, recycling and proper disposal. Our regional water management strategy is designed to reduce the impacts of our water use on stakeholders and the relevant watersheds, and to minimize risks associated with produced water disposal, supply sourcing and business interruption. We target opportunities that conserve fresh water for community needs while reducing business risk linked to access to water resources.
Creating Safe, Healthy and Secure Workplaces
We are committed to providing safe, healthy and secure workplaces. We continuously strive to improve our procedures, train our workforce to reduce safety risk, reinforce our strong safety culture and build relationships with our contractor workforce. We believe our workforce is trained and ready to respond if natural disasters, security incidents, operational disruptions or other events occur. We also maintain detailed business continuity plans to protect our workforce and continue critical business functions during sustained efforts, including a public health event such as a pandemic. In 2020, we achieved a second consecutive year of record safety performance, as measured by total recordable incident rate (TRIR) for both employees and contractors.
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CORPORATE GOVERNANCE PRINCIPLES
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Our Corporate Governance Principles address our Board’s general function, including its responsibilities, Board size, director elections and limits on the number of Board memberships. These principles also address Board independence, committee composition, the process for director selection and director qualifications, our Board’s performance review, the Board’s planning and oversight functions, director compensation and director
17 MARATHON OIL | GOVERNANCE
retirement and resignation. The Corporate Governance Principles are available on our website at www.marathonoil.com under Investors—Corporate Governance.
Our Code of Business Conduct, which applies to our directors, officers and employees, is available on our website at www.marathonoil.com under Investors—Corporate Governance. In addition, our Code of Ethics for Senior Financial Officers, which applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, is available on our website at www.marathonoil.com under Investors—Corporate Governance.
We intend to disclose any amendments and any waivers to our Code of Ethics for Senior Financial Officers on our website at www.marathonoil.com under Investors—Corporate Governance within four business days. The waiver information will remain on the website for at least 12 months after the initial disclosure of such waiver.
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POLICY FOR REPORTING BUSINESS ETHICS CONCERNS
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Our Policy for Reporting Business Ethics Concerns establishes procedures for the receipt and treatment of business ethics concerns received by the Company, including those regarding accounting, internal accounting controls or auditing matters. The Policy for Reporting Business Ethics Concerns is available on our website at www.marathonoil.com under Investors—Corporate Governance—Policies and Reporting—Policies.
Our Trading of Securities by Directors, Officers and Employee Policy prohibits our directors and officers from pledging, hedging and trading in derivatives of our stock. Excluding derivative securities issued by the Company, no director or officer of the Company may purchase or sell, directly or indirectly through family members or other persons or entities, any financial instrument including, but not limited to, put or call options, the price for which is affected in whole or in part by changes in the price of Company’s securities (including common or preferred stock, debt securities and derivative securities), or conduct any hedging transactions related to such securities. The policy does not apply to non-officer employees.
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COMMUNICATIONS FROM INTERESTED PARTIES
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All interested parties, including security holders, may send communications to our Board through the Corporate Secretary office. You may communicate with our outside directors, individually or as a group, by emailing non-managedirectors@marathonoil.com. You may communicate with the Chairs of each of our Board’s committees by email as follows:
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Committee Chair
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Email Address
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Audit and Finance Committee
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auditandfinancechair@marathonoil.com
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Compensation Committee
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compchair@marathonoil.com
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Corporate Governance and Nominating Committee
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corpgovchair@marathonoil.com
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Health, Environmental, Safety and Corporate Responsibility Committee
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hescrchair@marathonoil.com
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The Corporate Secretary will forward to the directors all communications that, in her judgment, are appropriate for consideration by the directors. Examples of communications that would not be considered appropriate for consideration by the directors include commercial solicitations and matters not relevant to the Company’s affairs.
2020 Executive Compensation Highlights
In early 2020, the Committee continued its ongoing commitment to sound corporate governance and executive compensation practices by approving and awarding performance incentive opportunities that meaningfully aligned executives with stockholder interests. The 2020 program components (as described under 2020 Executive Compensation Program Elements) delivered a consistent design and similar level of award opportunities for our NEOs as they received in 2019. The 2020 compensation program for NEOs featured:
» Salaries at consistent levels with 2019;
» Annual incentive opportunities tied to performance against five quantitative metrics and six strategic objectives, with performance aligned with the Company’s original 2020 business plan; and
» Long-term, stock-based incentive opportunities delivered through performance share units (PSUs) tied to the Company’s relative stockholder return performance, time-vested restricted stock and restricted stock units (RSUs) and stock options.
Stockholder-Aligned Response to Pandemic Market Conditions
In the second quarter, the Company took immediate action to respond to severe market conditions brought on by the Coronavirus pandemic. As part of the cash preservation actions described earlier and to reflect dramatically reduced activity levels, the Company implemented a reduction in force of approximately 16% of U.S. employees.
In conjunction with those actions, executive officers’ base salaries were reduced by 10% and the Board reduced its cash retainer by 20% for the remainder of 2020.
The Committee took no action to replace or supplement the lost compensation value from outstanding equity-based incentives for executive officers, nor did the Committee modify performance objectives on any outstanding long-term performance awards.
2020 Annual Cash Bonus Program Metrics
The Company’s initial annual cash bonus program featured metrics and targets aligned with the original 2020 business plan and capital investment plan. When pandemic conditions sharply reduced energy demand, the Company swiftly scaled back its planned 2020 capital program by nearly 50%. This reduction rendered the original performance objectives under the annual cash bonus program obsolete, and the goals did not align with the Company’s modified business plan for the remainder of 2020.
In July 2020, the Committee approved a revised set of performance metrics and objectives aligned with the prevailing market conditions, and more reflective of the specific safety, operating, and financial objectives the Company aspired to meet for the remainder of the year. See “2020 Annual Cash Bonus” for more information. These revised metrics, targets and objectives offered guidance and motivation for all employees during uncertain conditions. The Committee committed to assess at year end the Company’s performance against these revised objectives within a discretionary evaluation of potential 2020 bonus payments. Due to continued market uncertainties, and the importance of disciplined cash preservation, the Committee made no formulaic commitment to bonus payments that might result from the Company’s performance against the revised objectives. The Committee instead reserved discretion to evaluate the Company’s complete performance under prevailing year-end market conditions and in light of the Company’s overall financial health.
As described later, by year end the Company exceeded all of the revised performance objectives, consistent with the operating and financial highlights described above. In February 2021, the Committee approved 2020 NEO bonus payments at 80% of their original target opportunities. The Committee believes that the Company’s cumulative 2020 performance under extraordinarily difficult conditions merited meaningful recognition through annual bonuses. The Committee also determined that bonus funding should remain below original target levels in alignment with the reduced contributions of the revised business plan.
27 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
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2021 COMPENSATION CHANGES
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In the second half of 2020, the Committee and the Company’s management embarked on a comprehensive re-evaluation of our executive compensation programs, with input from the Committee’s independent compensation consultant. The review centered on a fundamental belief that the industry’s traditional compensation model no longer aligned with changes within the industry and new performance accountabilities, including excellence in ESG.
The Company sought to design and implement a program in 2021 that addressed concerns that investors have articulated about industry compensation practices. The Company focused on building a compensation program that would support and reward achievement of the following:
» Demonstrated excellence in ESG, including peer leading safety and reduced greenhouse gas emissions;
» The generation of sustainable free cash flow and corporate returns at lower and more volatile commodity prices;
» Differentiated capital efficiency that supports peer-leading enterprise break-even performance;
» Financial and value creation outcomes that compete with investment opportunities both inside and outside of traditional oil and gas investments; and
» Total reward opportunities that align more closely with compensation opportunities both within and outside the independent oil and gas E&P industry.
To that end, the Committee approved numerous changes to short-term and long-term incentive metrics, compensation vehicle mix and target officer compensation pay levels, as summarized below.
2021 CEO Compensation
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2021 CEO Target Compensation Reduced 25%;
LTI Reduced 35%
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The Committee reduced total target compensation opportunities for all NEOs under a new program structure that features incentives aligned with business objectives in the new market conditions. The Committee reduced the Chief Executive Officer’s total target compensation opportunity by 25% and reallocated the components to align more closely with observed pay practices across a broader array of US industries, while remaining competitive within observed E&P compensation ranges.
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Year
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Base Salary
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Target Bonus Opportunity
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LTI Award
Target Value
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Total
Target
Compensation
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2020
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$1,200,000
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$1,620,000
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$9,200,000
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$12,020,000
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2021
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$1,200,000
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$1,800,000
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$6,000,000
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$9,000,000
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MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 28
2021 Annual Cash Bonus
The Company simplified the 2021 annual cash bonus design to focus on Marathon Oil’s core financial and ESG framework in conjunction with the Committee’s assessment of other year-end results and individual performance. Changes to the annual cash bonus program are intended to bring an immediate focus on items that should positively impact long-term sustainability and shareholder value. The five quantitative performance metrics, which are weighted at 80%, consist of the following:
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Key Focus Area
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Compensation Metric
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Safety
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Total Recordable Incident Rate (TRIR)
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ESG Excellence
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GHG Emissions Intensity
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Capital Efficiency / FCF
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Corporate FCF Breakeven
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Capital Discipline / FCF
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Reinvestment Rate
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Financial Returns / Balance Sheet
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Cash Flow per Debt Adjusted Share
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The remaining 20% weighting consists of qualitative objectives not considered by the quantitative metrics, such as prevailing ESG and other business priorities.
2021 Long-Term Incentive Awards
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The 2021 long-term incentive (LTI) awards continue to strongly align executive officers with the interests of stockholders. The new program rewards performance aligned with new industry imperatives, including the addition of a cumulative free cash flow generation metric and relative Total Shareholder Return (TSR) compared to the broader market and outside our immediate industry peer group.
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Key Change
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Objective
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Three LTI Vehicles (RSUs, TSR PSUs, FCF PSUs), all denominated in shares
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Further diversifies LTI Metrics; tied to share performance & ownership
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S&P 500 and S&P Energy added to peer group for TSR PSUs
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Mitigates overreliance on TSR vs. E&P peers; promotes strong performance vs. broader market
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Introduction of FCF PSUs
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Underscores commitment to sustainable FCF
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The 2021 LTI award consists of three vehicles, all denominated in shares:
» Free cash flow accountability (FCF PSUs). Performance units tied to cumulative free cash flow generated against fixed targets, over a two-year performance period
» Broader relative stockholder return performance (TSR PSUs). Performance units tied to three-year relative TSR performance against the S&P 500 Index, the S&P Energy Index and 10 industry peer companies
» Consistent alignment with stockholders (RSUs). Restricted stock units that time-vest over three years, subject to continued employment conditions
29 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
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COMPENSATION PHILOSOPHY
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Our success is based on financial performance and operational results, and we believe that our executive compensation program is an important driver of that success. The primary objectives of our program are to:
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Pay for performance
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Our program is designed to reward executives for their performance and motivate them to continue to perform at a high level. Cash bonuses based on annual performance, combined with equity awards that vest over several years, balance short-term and long-term business objectives.
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Encourage creation
of long-term
stockholder value
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Equity awards and stock ownership requirements align our executives’ interests with those of our stockholders. Our NEOs’ long-term incentive awards feature equity-based grants with large portions tied to financial performance and long-term stockholder returns.
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Pay competitively
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We provide market-competitive pay levels to attract and retain the best talent, and we regularly benchmark each component of our pay program, including our benefit programs, to ensure we remain competitive.
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COMPENSATION GOVERNANCE AND BEST PRACTICES
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The Committee periodically evaluates market best practices and pay programs at other companies, and modifies our compensation program as necessary. The Committee seeks to provide balanced incentives, while managing compensation risks appropriately in the context of our business objectives. Our program incorporates the following best practices:
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WHAT WE DO
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WHAT WE DON’T DO
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þ
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Emphasize at-risk compensation designed to link pay to performance; all LTI vehicles denominated in shares
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ý
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Offer employment agreements to our executive officers
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þ
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Engage an independent compensation consultant to advise the Committee
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ý
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Provide gross-up payments to cover excess parachute payment excise taxes for executive officers
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þ
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Maintain stock ownership requirements for executive officers and directors
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ý
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Allow margin, derivative or speculative transactions with our company stock, such as hedges, pledges and margin accounts, by executive officers and directors
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þ
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Maintain “double-trigger” change in control cash payments and accelerated vesting of certain equity awards
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ý
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Reward executives for excessive, inappropriate or unnecessary risk-taking
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þ
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Dedicate significant time each year to robust executive succession planning and leadership development
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Incorporate compensation clawback provisions in annual and long-term incentives
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þ
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Offer minimal use of perquisites and no related tax gross-ups
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þ
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Include ESG metrics in annual incentive compensation design to further align with stakeholder interest
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þ
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Proactively engage with our stockholders on compensation, environmental and governance issues
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MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 30
Our executive compensation program creates a strong alignment with stockholder interests. We deliver the largest portion of NEO compensation through equity-based, long-term incentives that tie eventual realized compensation to the absolute and relative performance of our stock. Our annual bonus delivers payments directly aligned with performance against our strategic, operational and financial commitments each year.
The compensation that Mr. Tillman will realize from his outstanding awards and opportunities has aligned well with stock price and company performance. His reported pay, as detailed in the Summary Compensation table, does not reflect the actual value he realizes from at-risk incentive opportunities.
Mr. Tillman’s realized compensation from the total opportunities awarded from 2018 through 2020 aligns well with stock price and company performance and with the Company’s annual employee safety, operating and financial performance. The bar charts below compare each year’s total target compensation opportunity awarded to Mr. Tillman in each of the past three years, and the amounts Mr. Tillman has actually realized, or is on track to realize, as of December 31, 2020.
Total realized or realizable compensation for each year include each year’s base salary paid, actual annual bonus earned, and the December 31, 2020 value of each year’s long-term incentive award, based on the Company’s absolute and relative stock price performance over each respective performance and vesting periods. Target compensation represents annual salary rate, target bonus opportunity and intended grant date value of long-term incentive awards.
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HOW WE DETERMINE EXECUTIVE COMPENSATION
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Compensation Committee
The Committee is responsible for establishing and overseeing executive compensation programs and policies that are consistent with our overall compensation philosophy. In making such decisions, the Committee considers a variety of factors, including stockholder feedback, information provided by its independent compensation consultant, our CEO’s input, peer group data, each executive’s experience in the role, Company and individual performance, internal pay equity and any other information the Committee deems relevant in its discretion.
31 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
Stockholder Engagement
The Committee considers the outcomes of the Company’s advisory stockholder vote on our executive compensation program and any associated outreach initiatives when making compensation decisions.
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At our 2020 Annual Meeting, our stockholders expressed support for the Company’s proposals and all of our agenda items were approved. Within those approvals, approximately 93% of shares voted were in favor of our 2020 “say-on-pay” agenda item. Overall, investor feedback has been positive regarding our executive compensation program and its link between our pay and performance both philosophically and historically.
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2020
“Say-on-Pay”
Support
93%
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In 2020, we engaged with and solicited valuable feedback from a broad base of investors on various topics, such as compensation, environmental issues and governance practices. We then shared this feedback with the Committee and our Board. As a result of these conversations, we added a greenhouse gas intensity metric for the 2020 annual cash bonus program and retained that metric for 2021. The changes for 2021 as described in more detail under “2021 Compensation Changes” were also made in part as a result of these conversations. We remain committed to engaging stockholders regularly and to ensuring alignment of our compensation programs and stockholder interests.
Compensation Consultant
For 2020, the Committee directly engaged Meridian Compensation Partners LLC (Meridian) as its independent compensation consultant to advise the Committee on executive compensation matters. Meridian provides the Committee with information on items such as emerging industry trends (in both broader oil and gas and general industries), legislative issues, defining the Company’s peer group and benchmarking our executive compensation programs against the peer group. Meridian provides no other services to the Company or our executive officers, and the Committee has the right to terminate the services of Meridian and appoint a new compensation consultant at any time.
Meridian interacts with several of our officers and employees as necessary. In addition, Meridian may seek input and feedback from members of our management regarding its work product prior to presentation to the Committee to confirm that information is accurate or address other issues. We believe that Meridian provides an independent perspective to the Committee.
The CEO’s Role
The Committee seeks significant input from the CEO on compensation decisions and performance appraisals for all executive officers other than himself. All final compensation decisions for our executive officers are made by the Committee, except that the independent members of our full Board determine and approve the CEO’s compensation level. The CEO does not provide recommendations or participate in Committee or Board discussions concerning his own compensation.
Peer Group
Peer group benchmarking is one of several factors the Committee considers in setting pay. Our peer group, which the Committee reviews annually, is comprised of independent exploration and production companies that the Committee believes provide the best external benchmarks for the market in which we compete for executive talent and for general company performance.
In its review of the peer group for 2020, the Committee considered pertinent financial measures for each company, as shown (in millions) in the table below, including enterprise value and market capitalization as of December 31, 2019, assets as of the most recent quarter and revenue based on a trailing twelve month period as of the most recent quarter.
MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 32
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Enterprise Value
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Market Capitalization
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Assets
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Revenue
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Peer Group 50th Percentile
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$18,713
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$9,975
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$18,078
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$6,287
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Marathon Oil
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$15,433
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$10,863
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$20,373
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$5,071
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Following its review of the peer group, the Committee removed Anadarko Petroleum Corporation due to its acquisition by Occidental and replaced it with Cimarex Energy Co.
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2020 Peer Group Companies
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Apache Corporation
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Hess Corporation
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Chesapeake Energy Corporation
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Murphy Oil Corporation
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Cimarex Energy Co.
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Noble Energy, Inc.*
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Continental Resources, Inc.
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Ovintiv Inc.
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Devon Energy Corporation
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Pioneer Natural Resources Company
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EOG Resources, Inc.
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* Due to acquisition, Noble Energy, Inc. (Noble) was removed from the peer group in 2020.
Compensation Benchmarking Process
The Committee conducts an annual comparison of the compensation of our NEOs to the compensation of executives with similar job responsibilities among companies in our peer group, based upon information gathered and provided by Meridian through surveys and public company disclosure. The Committee references this competitive market analysis in making compensation decisions for the coming year. The Committee has typically aligned executive total direct compensation opportunities at the 50th percentile of similar opportunities across the peer group, adjusted for internal parity and individual factors across executives. We define total direct compensation as the sum of base salary, target annual cash bonus and the target grant-date value of long-term incentive awards.
In October 2019, Meridian provided the Committee a market analysis that included information regarding peer group executives’ base salaries, target annual bonus levels and the mix and level of long-term incentives. According to this analysis, NEO compensation levels varied by individual, but overall were appropriately positioned relative to 50th percentile benchmarks of comparable roles. Additionally, as part of this exercise, the Committee reviewed supporting benchmarks for the broader oil and gas industry and general industry.
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2020 EXECUTIVE COMPENSATION PROGRAM ELEMENTS
|
Our executive compensation program includes base salary, annual cash bonuses, LTI awards and other benefits and perquisites. By design, a significant portion of our executive officers’ overall compensation, including annual cash bonuses and LTI awards, is “performance-based,” and the opportunity to earn those awards is largely dependent on Company and individual performance. The Committee determines a total compensation opportunity for each executive officer based on a review of compensation benchmarks from independent upstream companies, broader oil and gas companies and general industry, a review of our compensation philosophy and the Committee’s subjective judgment. Because the Committee does not set fixed percentages for each element of compensation, the mix may change over time as the competitive market moves, governance standards evolve or our business needs change.
33 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
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90%
of CEO’s total target direct compensation influenced by Company performance
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Ninety percent of our CEO’s total target direct compensation is influenced by Company performance. The allocation of our compensation components, with a significant emphasis on LTI awards, aligns with the practices of our peer group. The following pie charts reflect the 2020 pay mix of total target direct compensation components for our CEO and other NEOs, respectively.
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2020 TOTAL TARGET DIRECT COMPENSATION OVERVIEW
|
The Committee determined 2020 base salaries, target annual cash bonus opportunities and LTI awards in February 2020. Given changes in the macro environment, the Committee later approved reductions in base salaries and changes to the annual cash bonus program, which are further described under “Base Salary” and “Annual Cash Bonus.” The Committee determined the payment of 2020 annual cash bonuses in January 2021, after 2020 business results were known and audited.
The following table summarizes the elements of total direct compensation the Committee awarded to our NEOs for 2020 as part of our regular compensation program. The amounts shown differ from the amounts shown in the Summary Compensation Table because this table provides the target value for short-term and LTI compensation. Target LTI values reflect established compensation valuation methodologies that are similar to, but may differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and the Grants of Plan-Based Awards Table.
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Name
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2020 Base Salary*
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Target Bonus Opportunity
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LTI Award
Target Value
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Total
Target
Compensation
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Mr. Tillman
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$1,200,000
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$1,620,000
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$9,200,000
|
|
|
$12,020,000
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|
|
Mr. Little
|
$600,000
|
|
|
$510,000
|
|
|
$2,500,000
|
|
|
$3,610,000
|
|
|
Mr. Whitehead
|
$590,000
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|
|
$501,500
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|
|
$2,500,000
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|
|
$3,591,500
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Mr. Wagner
|
$500,000
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|
$425,000
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|
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$2,000,000
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|
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$2,925,000
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Mr. Hedgebeth
|
$575,000
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|
$488,750
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|
|
$1,800,000
|
|
|
$2,863,750
|
|
|
*2020 Base Salary reflects salaries initially approved by the Committee in February 2020.
The primary purpose of base salary is to recognize and reward overall responsibilities, experience and established skills. In setting base salary, the Committee compares each NEO’s current salary to the market 50th percentile and considers each individual’s experience and expertise, the value and responsibility associated with the role and internal pay equity. The Committee does not use a formula to calculate base salary increases for NEOs.
In February 2020, the Committee reviewed base salaries and the considerations noted above. The Committee determined to make no base salary increases for the NEOs at that time, except for Mr. Whitehead who was
MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 34
positioned below the median of the peer benchmark at the time of the analysis. He received a base pay increase for closer market compensation alignment effective March 1, 2020.
As part of the Company’s broad-based effort to respond to the COVID-19 pandemic, the Company implemented cost reduction measures in April 2020, including the Committee’s approval of a 10% temporary reduction in base salary for the NEOs for the period of May 4, 2020 through the end of 2020.
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Name
|
Base Salary as of
March 1, 2020
|
Base Salary as of
May 4, 2020
|
Base Salary as of
January 1, 2021
|
Mr. Tillman
|
$1,200,000
|
|
|
$1,080,000
|
|
|
$1,200,000
|
|
|
Mr. Little
|
$600,000
|
|
|
$540,000
|
|
|
N/A
|
|
Mr. Whitehead*
|
$590,000
|
|
|
$531,000
|
|
|
$590,000
|
|
|
Mr. Wagner
|
$500,000
|
|
|
$450,000
|
|
|
$500,000
|
|
|
Mr. Hedgebeth
|
$575,000
|
|
|
$517,500
|
|
|
N/A
|
|
* Mr. Whitehead's base pay was increased from $575,000 to $590,000 effective March 1, 2020, which was then subject
to the 10% temporary reduction effective May 4, 2020.
The Company maintains an annual cash bonus program that rewards executives for the Company’s achievement of short-term financial, operational and strategic goals that drive stockholder value and for their individual performance during the year. At the beginning of the year, the Committee determines a fixed target bonus dollar opportunity for each executive, based on an observed range of market practices and relative internal parity across roles. The executive can earn from 0% to 200% of the target bonus opportunity based on the Company’s performance against a scorecard of quantitative business metrics and strategic objectives and the individual’s performance. In 2020, no individual performance adjustments were applied.
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|
OFFICER BONUS FRAMEWORK
|
[
|
Base Salary
|
x
|
Bonus Target
(as % of Base Salary)
|
=
|
Target Bonus Opportunity
|
]
|
x
|
Company Performance Score
70% Quantitative Performance
30% Strategic Performance
|
+/-
|
Individual Performance Adjustment
|
=
|
Annual Bonus Payout
|
Original 2020 Performance Metrics and Strategic Objectives
In December 2019, the Committee established quantitative performance metrics for the bonus program using the same menu of performance metrics and relative weighting as in the 2019 annual bonus program. These original 2020 quantitative performance metrics continued to emphasize operational excellence, financial leadership, personal safety and environmental stewardship. The scorecard included six strategic objectives for consideration.
The Company also uses this same scorecard to determine bonus funding for employees across the Company. The scorecard conveys to employees the Company’s top priorities and collective business objectives for the entire organization to focus on and achieve.
35 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
The following table shows the targets and weightings established by the Committee at the end of 2019 for 2020.
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|
|
Critical Capability
|
Weight (%)
|
Performance Measure
|
Original Target
|
Operational Excellence
|
10
|
TRIR(1)
|
0.47
|
25
|
Production, MBOEPD(2)
|
410
|
Financial Stewardship
|
25
|
Cash Costs, $/BOE(3)
|
6.62
|
15
|
F & D Cost, $/BOE Reserve(4)
|
22.05
|
25
|
EBITDAX, $/BOE(5)
|
20.97
|
Strategic Objectives
|
Year-on Year improvement in Cash Return on Invested Capital (6)
|
Year-on Year improvement in Cash Flow per Debt Adjusted Share (7)
|
Total Resource additions (excluding dispositions) (8)
|
Safe, Clean, Responsible Days (9)
|
Cash returns to stockholders (10)
|
Year-on Year improvement in total GHG emissions intensity (11)
|
(1) Calculated by dividing (a) the Occupational Safety and Health Administration (OSHA) recordable incidents multiplied by 200,000 by (b) the total number of exposure hours. This metric includes both Company employees and contractors and is applied to Company operated properties only.
(2) Available for sale, adjusted for catastrophic events, changes in business climate, acquisitions and divestitures.
(3) Cash cost includes direct expense, indirect expense, general and administrative expense; adjusted for legal settlements, pay for performance, special items, acquisitions and divestitures. Production denominator is recorded sales adjusted for catastrophic events, changes in business climate, acquisitions and divestitures.
(4) F&D cost includes development CapEx (excluding acquisition costs). Reserves exclude acquisitions, dispositions and impairments as a result of price impact.
(5) Earnings before interest, taxes, depreciation, amortization and exploration adjusted for special items. Production denominator is recorded sales adjusted for catastrophic events, changes in business climate, acquisitions and divestitures.
(6) Cash return on invested capital is calculated by dividing cash flow (defined as operating cash flow before working capital plus net interest after tax) by invested capital, which is the sum of average stockholders equity and average net debt.
(7) Cash flow per debt adjusted share is calculated by dividing cash flow (defined as operating cash flow before working capital + net interest after tax) by total shares including debt shares (debt shares are the average net debt during a calendar year divided by the average annual stock price, or simply equitizing debt).
(8) Total resource additions excluding dispositions
(9) Safe, clean, responsible days – No serious events, no recordable injuries and no spills to the environment experienced companywide
(10) Total cash return to stockholders is calculated as dividend plus share repurchase
(11) Total GHG emissions intensity excluding acquisitions & dispositions
Response to Market Conditions: Revised 2020 Bonus Methodology
In April 2020, the Company developed an entirely new business plan to respond to pandemic-related market conditions and the severe decrease in commodity prices. The Company dramatically reduced its total spend, including a nearly 50% reduction in planned capital investments and a 20% reduction in cash operating expenses, relative to the initial 2020 budget.
The significant shift in financial and operating objectives rendered obsolete some of the underlying priorities and goals in the original bonus scorecard. The new business plan required the Company to issue revised goals and objectives to executives and the broad workforce, to focus the entire organization on critical performance criteria under the severe market conditions.
MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 36
In July 2020, the Committee approved a revised 2020 bonus methodology, featuring performance metrics and strategic objectives aligned with the new business plan. Under the new methodology, the Committee committed to evaluate the Company’s 2020 performance against both the original and revised scorecards, along with the prevailing market conditions and the Company’s financial health, to determine whether any bonus funding was appropriate, and if so, at what levels.
The revised scorecard featured the following metrics and objectives.
|
|
|
|
|
|
|
|
|
Critical Capability
|
Performance Measure
|
Revised Target
|
Operational Excellence
|
TRIR
|
0.47
|
Production, MBOEPD
|
377
|
Financial Stewardship
|
Cash Costs, $/BOE
|
6.50
|
EBITDAX, $/BOE
|
11.73
|
Strategic Objectives
|
Year-on Year improvement in Cash Return on Invested Capital
|
Year-on Year improvement in Cash Flow per Debt Adjusted Share
|
Safe, Clean, Responsible Days
|
Year-on Year improvement in total GHG emissions intensity
|
Annual Cash Bonus Payouts Earned for 2020
In January 2021, the Committee followed the revised methodology to determine earned bonuses for 2020. The Committee reviewed performance against both the original and revised scorecards, along with the prevailing market conditions and the Company’s financial health.
The Committee observed that the Company responded well to 2020’s historic volatility and severe economic conditions. The Company exceeded all objectives under the revised scorecard, and met or exceeded several objectives on the original scorecard.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical Capability
|
Performance Measure
|
Original Target
|
Revised Target
|
Actual 2020 Performance
|
Operational Excellence
|
TRIR
|
0.47
|
0.47
|
0.24
|
Production, MBOEPD
|
410
|
377
|
383
|
Financial Stewardship
|
Cash Costs, $/BOE
|
6.62
|
6.50
|
5.94
|
EBITDAX, $/BOE
|
20.97
|
11.73
|
12.26
|
Strategic Objectives
|
Approximately 12% Year-on Year improvement in Cash Return on Invested Capital
|
Approximately 7% Year-on Year improvement in Cash Flow per Debt Adjusted Share
|
Achieved 97% asset average of Safe, Clean, Responsible Days
|
19% Year-on Year improvement in total GHG emissions intensity
|
The Committee also considered additional context for the Company’s outperformance against these objectives, including:
» Employees achieved these results while many were working under difficult conditions or remotely in order to protect their health and the health of their families.
» In total, the revised business plan represented a lower level of performance achievement than the Company had originally planned for 2020.
37 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
» The Company’s investors had experienced significant decreases in share value during 2020, and had not fully recovered their losses by year’s end.
» Cash expense management, including the cash spend on earned bonuses, remained a high priority.
With this information and context, the Committee approved payment of NEO annual bonuses at 80% of the original target values, as listed in the following table.
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|
Bonus Eligible Earnings*
|
|
Bonus Target
|
Target Bonus Opportunity
|
Percent of Target Achieved
|
Actual Bonus Payout
|
Mr. Tillman
|
$1,200,000
|
|
|
135%
|
$1,620,000
|
|
|
80%
|
$1,296,000
|
|
|
Mr. Little
|
$600,000
|
|
|
85%
|
$510,000
|
|
|
80%
|
$408,000
|
|
|
Mr. Whitehead
|
$587,404
|
|
|
85%
|
$499,293
|
|
|
80%
|
$399,435
|
|
|
Mr. Wagner
|
$500,000
|
|
|
85%
|
$425,000
|
|
|
80%
|
$340,000
|
|
|
Mr. Hedgebeth*
|
$575,000
|
|
|
85%
|
$488,750
|
|
|
80%
|
N/A
|
|
*Eligible earnings were calculated without regard to the temporary 2020 base pay reductions. Mr. Hedgebeth did not receive a bonus payment as he resigned prior to bonus payout.
Long-term incentive, or LTI, awards align the interests of NEOs and stockholders over the long term and are intended to represent the largest portion of the NEO’s total direct compensation. LTI is designed to incentivize executives to achieve strategic goals that will maximize long-term stockholder value and also encourage retention through continued service requirements. These awards assist NEOs in establishing and maintaining significant equity ownership and place a meaningful portion of compensation at risk based on our common stock price performance.
The Committee awards LTI based on a target award value that reflects competitive market data, each NEO’s performance and each NEO’s target total compensation. The 2020 target award value for NEOs was allocated 50% to performance units, 20% to stock options and 30% to restricted stock or restricted stock units.
Each year, the Committee grants LTI awards at its regularly scheduled February meeting. The grant date for such awards is generally the meeting date. The actual LTI compensation realized by each NEO depends on the price of the underlying shares of common stock at the time of vesting or exercise, and in the case of performance units, our TSR relative to that of the companies in our peer group.
2020 Long-Term Incentive Awards
After considering competitive market data, the demand for talent, cost considerations and the performance of both the Company and the individual NEOs, the Committee awarded LTI to each NEO consistent with our normal grant timeline resulting in a grant date of February 19, 2020.
The table below lists the target grant date LTI value for each NEO. The Committee’s methodologies to deliver target LTI values are similar to, but can differ from, the methodologies used for accounting purposes as reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table. Additional information about each LTI award, including the number of shares subject to each award, is shown in the Grants of Plan-Based Awards Table.
MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 38
|
|
|
|
|
|
Total 2020 LTI Awards Target Value
|
Name
|
Annual Target
|
Mr. Tillman
|
$9,200,000
|
Mr. Little
|
$2,500,000
|
Mr. Whitehead
|
$2,500,000
|
Mr. Wagner
|
$2,000,000
|
Mr. Hedgebeth
|
$1,800,000
|
Performance Units
The Committee believes that a performance unit program based on TSR relative to peer companies aligns pay and Company performance. The industry peers selected for each performance cycle generally match the industry peers used for compensation benchmarking. TSR is determined by adding the sum of stock price appreciation or reduction per share, plus cumulative dividends per share for the performance period, and dividing that total by the beginning stock price per share. For purposes of this calculation, the beginning and ending stock prices are the averages of the closing stock prices for the month immediately preceding the beginning and ending dates of the performance period. The Committee generally has sole and absolute discretion to reduce the final payment associated with any performance unit award as it may deem appropriate. The 2019 and 2020 performance units, if earned, will be paid in stock. The 2018 performance units are cash settled.
2020 Performance Units
In February 2020, the Committee awarded the NEOs performance units that will vest based on relative TSR for the three-year performance period ending December 31, 2022. The percentage of units earned ranges from 0% to 200% of the units granted based on the payout table below. Each NEO will receive vested shares of common stock equal to the number of units granted multiplied by the payout percentage. Dividend equivalents accrue and are paid in cash based on the number of shares earned at the end of the performance period. Under the 2020 award terms, if there is announcement during the performance period of an event that if completed would result in a peer group member either ceasing to exist or no longer being a company for which TSR can be calculated from publicly available information, then upon such announcement, that peer group member is removed from the peer group. The payout percentages are then adjusted accordingly by the Committee over the remaining peer group members to preserve a reasonably similar payout stratification as the original scale, while accounting for the reduced number of peer group members. Since the time of grant, Noble Energy, Inc. (Noble Energy) has been acquired and therefore, has been removed from the peer group. The payout percentages for each ranking were recalibrated over the 11 companies, as shown in the following payout table.
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|
|
MRO TSR Ranking
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
Payout (% of Target)
|
200%
|
180%
|
160%
|
140%
|
120%
|
100%
|
80%
|
60%
|
0%
|
0%
|
0%
|
2019 Performance Units
The performance units granted in February 2019 have a performance period end date of December 31, 2021 and as of December 31, 2020 followed the payout table below. As with the 2020 performance units, these awards, if earned, are paid in stock, except for accrued dividend equivalents, which are paid in cash. In accordance with the award agreement terms, in the event that any companies in our peer group either cease to exist or are no longer a company for which TSR can be calculated from publicly available information, Cimarex Energy Co. (Cimarex) and Concho Resources Inc. (Concho) were designated as replacement companies (in that order). Anadarko Petroleum Corporation (Anadarko) and Noble Energy, which were part of the peer group in 2019, have since been acquired and were replaced with Cimarex and Concho, respectively, per the award agreement terms.
39 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
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|
MRO TSR Ranking
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
Payout (% of Target)
|
200%
|
182%
|
164%
|
145%
|
127%
|
109%
|
91%
|
73%
|
54%
|
0%
|
0%
|
0%
|
In the first quarter of 2021, Concho was acquired. Under the award terms, no replacement peer companies remained. Therefore, the Committee approved recalibrating the payout percentages over the smaller 11 company peer group.
2018 Performance Units
For the performance period ending December 31, 2020, we ranked 5 out of 12 companies. Per the award agreement terms as approved by the Committee at the time of grant, due to their acquisitions, Anadarko and Noble Energy, both part of the peer group in 2018, were replaced with Cimarex and Concho, respectively. In January 2021, the Committee determined final payout values for each NEO. Although we ranked 5 out of 12 companies, the payout was capped at 100% due to negative TSR. The payouts, which were made on January 28, 2021, were $1,894,887, $574,214, $505,306, $413,433 and $367,497 for each of Messrs. Tillman, Little, Whitehead, Wagner and Hedgebeth, respectively.
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|
MRO TSR Ranking
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
Payout (% of Target)
|
200%
|
182%
|
164%
|
145%
|
127%
|
109%
|
91%
|
73%
|
54%
|
0%
|
0%
|
0%
|
Stock Options
Stock options provide a direct link between officer compensation and the value delivered to stockholders. The Committee believes that stock options are inherently performance-based, as option holders only realize compensation if the value of our stock increases following the grant date.
Stock options granted according to our normal annual grant timeline generally have a three-year ratable vesting period and a maximum term of ten years.
Restricted Stock and Restricted Stock Units
The Committee awards restricted stock, or restricted stock units for individuals who are retirement eligible during the vesting period, for diversification of the LTI award mix, for consistent alignment between executives and stockholders and for retention purposes. Restricted stock and restricted stock units provide recipients with the opportunity for capital accumulation, leading to retention and stock ownership and a more predictable long-term incentive value than is provided by performance units or stock options.
Restricted stock and restricted stock units awarded generally vest in full on the third anniversary of the grant date. Prior to vesting, restricted stock recipients have the right to vote and receive dividends on the restricted shares and restricted stock unit recipients receive dividend equivalents on the restricted stock units and do not have voting rights during the vesting period.
MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 40
Perquisites
We offer limited perquisites to our NEOs. We believe these perquisites are reasonable, particularly because the cost of these benefits constitutes a small percentage of each NEO’s total compensation. The Committee assesses these perquisites at least annually as part of its total competitive review. We do not provide any tax gross-ups on these perquisites. The perquisites available to our NEOs include reimbursement for certain tax, estate and financial planning services up to $15,000 per year, an enhanced annual physical examination and a Company-provided car service for our CEO. Limited personal use of the Company aircraft is also available to our NEOs, and family members and guests may also accompany officers on business travel. Any aggregate incremental cost to the Company resulting from the personal use of the Company aircraft would be included in the “All Other Compensation” column of the Summary Compensation Table. Our NEOs also participate in the health, retirement, matching gift program and other benefit plans generally available to our U.S. employees.
See the “All Other Compensation” column of the Summary Compensation Table and the footnotes following the Summary Compensation Table for additional details concerning the perquisites provided to our NEOs in 2020.
Retirement Benefits
We offer our NEOs the opportunity to provide for retirement through four plans.
» Marathon Oil Company Thrift Plan (Thrift Plan) – A tax-qualified 401(k) plan.
» Retirement Plan of Marathon Oil Company (Retirement Plan) – A tax-qualified defined benefit pension plan.
» Excess Benefit Plan (Excess Plan) – A nonqualified plan allowing employees to accrue benefits above the tax limits, with components attributable to both the Thrift Plan and the Retirement Plan.
» Marathon Oil Company Deferred Compensation Plan (Deferred Compensation Plan) – A nonqualified plan that grows when an NEO accrues benefits above the tax limits in the Thrift Plan or when an NEO defers a portion of his or her eligible compensation.
The Thrift Plan and the Retirement Plan are broad-based plans that are open to all eligible employees of the Company. Benefits payable under our qualified and nonqualified plans are described in more detail in “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
We also currently sponsor retiree medical plans for a broad-based group of employees, including the NEOs hired before 2017.
Change in Control and Severance Benefits
Our NEOs do not have employment agreements but are eligible for change in control termination benefits under the Marathon Oil Corporation Officer Change In Control Severance Plan (Change in Control Plan), as described under “Potential Payments upon Termination or Change in Control.” We believe these change in control benefits are necessary to attract and retain talent within our industry, ensure continuity of management in the event of a change in control and provide our NEOs with the security to make decisions that are in the best interests of stockholders.
Our Board may exercise discretion to make severance payments to executives on a case-by-case basis. We have a policy requiring that our Board seek stockholder approval or ratification of certain severance agreements (not including the Change in Control Plan) for senior executive officers that would require payment of certain cash severance benefits exceeding 2.99 times the officer’s base salary plus the most recent annual cash bonus paid.
41 MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS
|
|
|
STOCK OWNERSHIP REQUIREMENTS
|
All of our officers who are “executive officers” for purposes of Section 16 of the Exchange Act are subject to our stock ownership requirements, which are intended to reinforce the alignment of interests between our officers and stockholders.
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|
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|
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|
|
EXECUTIVE OFFICER STOCK OWNERSHIP REQUIREMENTS
|
|
CEO’s actual
stock ownership over
10 x
base salary
|
Position
|
Multiple of Base Salary
|
|
Chief Executive Officer
|
6
|
|
Executive Vice Presidents
|
4
|
|
Senior Vice Presidents
|
2
|
|
Vice Presidents
|
2
|
|
Executive officers have five years from their respective appointment or promotion dates to achieve the designated stock ownership level. The Committee reviews each executive officer’s progress toward the requirements during the first quarter of each year to determine whether the market value of shares, including the value of unvested shares, satisfies our requirements. Stock options and performance units are not counted as shares owned in measuring stock ownership. Executive officers who do not hold the required level of stock ownership must hold the shares they receive upon vesting of restricted stock, restricted stock units or exercise of stock options (after payment of exercise prices and after taxes) until they have met their requirement. As of March 10, 2021, the date used in the beneficial ownership table above, each currently employed NEO meets the requisite threshold. To ensure that they bear the full risks of stock ownership, our officers, including our executive officers, are prohibited from engaging in hedging transactions related to our stock.
The Committee considers the tax effects to both the Company and the NEOs when making executive compensation decisions. While the Committee endeavors to deliver compensation in a tax efficient manner, the Committee’s priority is to provide performance-based and competitive compensation. Therefore, some compensation paid to NEOs is not deductible due to the limitations imposed by Section 162(m) of the Internal Revenue Code, which limits the deduction that we can take to $1 million per “covered employee” each year.
MARATHON OIL | COMPENSATION DISCUSSION AND ANALYSIS 42
The following table summarizes the total compensation for each NEO for the years shown.
|
|
|
SUMMARY COMPENSATION TABLE
|
|
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|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards(2)
($)
|
Option
Awards(2)
($)
|
Non‑
Equity
Incentive
Plan
Compen-
sation(3)
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(4)
($)
|
All
Other
Compensation(5)
($)
|
Total
($)
|
Lee M. Tillman
|
2020
|
1,167,692
|
|
—
|
|
|
7,135,923
|
|
1,830,414
|
|
1,296,000
|
|
364,600
|
|
269,089
|
|
12,063,718
|
|
Chairman, President and Chief Executive Officer
|
2019
|
1,189,615
|
|
—
|
|
|
8,421,294
|
|
1,791,293
|
|
1,944,000
|
|
403,012
|
|
301,637
|
|
14,050,851
|
|
2018
|
1,139,808
|
|
—
|
|
|
6,600,008
|
|
1,742,669
|
|
2,242,500
|
|
240,620
|
|
245,269
|
|
12,210,874
|
|
T. Mitchell Little (1)
|
2020
|
583,846
|
|
—
|
|
|
1,939,102
|
|
497,395
|
|
408,000
|
|
860,744
|
|
106,686
|
|
4,395,773
|
|
Executive Vice President, Advisor to the CEO and EG Operations
|
2019
|
600,000
|
|
—
|
|
|
2,288,392
|
|
486,762
|
|
612,000
|
|
1,205,873
|
|
|
120,042
|
|
5,313,069
|
|
2018
|
600,000
|
|
—
|
|
|
2,625,027
|
|
528,081
|
|
765,000
|
|
—
|
|
|
102,836
|
|
4,620,944
|
|
Dane E. Whitehead
|
2020
|
570,942
|
|
—
|
|
|
1,939,102
|
|
|
497,395
|
|
399,435
|
|
|
123,720
|
|
|
111,998
|
|
3,642,592
|
|
Executive Vice President and Chief Financial Officer
|
2019
|
575,000
|
|
—
|
|
|
2,196,851
|
|
467,293
|
|
586,500
|
|
129,892
|
|
111,561
|
|
4,067,097
|
|
2018
|
575,000
|
|
—
|
|
|
1,760,013
|
|
464,715
|
|
733,125
|
|
90,992
|
|
104,273
|
|
3,728,118
|
|
Patrick J. Wagner
|
2020
|
486,539
|
|
—
|
|
|
1,551,274
|
|
|
397,914
|
|
340,000
|
|
|
128,368
|
|
|
101,090
|
|
3,005,185
|
|
Executive Vice President, Corporate Development and Strategy
|
2019
|
500,000
|
|
—
|
|
|
1,830,706
|
|
389,408
|
|
586,500
|
|
133,963
|
|
120,294
|
|
3,560,871
|
|
2018
|
500,000
|
|
—
|
|
|
1,890,025
|
|
380,221
|
|
637,500
|
|
82,286
|
|
108,294
|
|
3,598,326
|
|
Reginald D. Hedgebeth (1)
|
2020
|
559,519
|
|
—
|
|
|
1,396,142
|
|
|
358,125
|
|
N/A
|
|
105,823
|
|
|
98,603
|
|
2,518,212
|
|
Executive Vice President, General Counsel and Chief Administrative Officer
|
2019
|
575,000
|
|
—
|
|
|
1,556,101
|
|
331,000
|
|
596,283
|
|
121,695
|
|
98,973
|
|
3,279,052
|
|
2018
|
575,000
|
|
—
|
|
|
1,280,010
|
|
337,977
|
|
646,875
|
|
85,354
|
|
88,346
|
|
3,013,562
|
|
(1) In May 2020, Mr. Little announced his intention to retire from the Company at the end of 2020, and effective May 4, 2020, Mr. Little ceased serving as the Company’s Executive Vice President, Operations and transitioned to the role of Executive Vice President, Advisor to the Chief Executive Officer with oversight for Equatorial Guinea operations, continuing to serve in an executive officer capacity through December 31, 2020. Mr. Little remained with the Company through year-end 2020. Additionally, Mr. Hedgebeth resigned his titles effective December 2, 2020, and gave notice of his intention to resign from the Company effective at year-end 2020. Mr. Hedgebeth continued to serve in an executive officer capacity and as a legal advisor to the Company through December 31, 2020.
(2) These columns reflect the aggregate grant date fair values calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. Assumptions used in the calculation of these amounts are included in footnote 19 to our consolidated financial statements in our annual reports on Form 10-K for the years ended December 31, 2020, December 31, 2019 and December 31, 2018. For 2018, 2019 and 2020, the Stock Awards column also includes the grant date fair value of the share-denominated performance units granted in February 2018, February 2019 and February 2020, respectively. Grants made in February 2018 will be settled in cash and grants made in February 2019 and February 2020 will be share settled. The value ultimately realized by the officers upon the actual vesting of the awards may or may not be equal to this determined value, as these awards are subject to market conditions and have been valued based on an assessment of the market conditions as of the grant date. The maximum (200%) payouts for the 2020 performance units using the December 31, 2020 closing stock price of $6.67 would be: for Mr. Tillman, $5,860,929; Mr. Little, $1,592,636; for Mr. Whitehead, $1,592,636; for Mr. Wagner, $1,274,103; and for Mr. Hedgebeth, $1,146,693. See the “Grants of Plan-Based Awards Table” and “Long-Term Incentive Awards” for further detail on our performance unit program.
43 MARATHON OIL | EXECUTIVE COMPENSATION
(3) This column reflects annual cash bonus payments, determined by the Committee and paid in the first quarter of the following year respectively, pursuant to the Company’s annual cash bonus program. These awards are discussed in further detail in our Compensation Discussion and Analysis under “Annual Cash Bonus.”
(4) This column reflects the annual change in accumulated benefits under our retirement plans. See “Post-Employment Benefits” for more information about our defined benefit plans and the assumptions used in calculating these amounts. No deferred compensation earnings are reported in this column because our non-qualified deferred compensation plans do not provide above-market or preferential earnings. In 2018 for Mr. Little, the actual change in accumulated benefit decreased by $226,165.
(5) The following table describes each component of the “All Other Compensation” column for 2020 in the Summary Compensation Table. For additional information regarding perquisites, see “Perquisites” in our Compensation Discussion and Analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Company Physicals(a)
($)
|
Tax &
Financial
Planning(b)
($)
|
Misc.(c)
($)
|
Company Contributions to Defined
Contribution
Plans(d)
($)
|
Matching
Contributions(e)
($)
|
Total All
Other
Compensation
($)
|
Mr. Tillman
|
977
|
|
15,000
|
|
29,844
|
|
215,768
|
|
7,500
|
|
269,089
|
|
Mr. Little
|
977
|
|
|
15,000
|
|
|
—
|
|
|
83,709
|
|
7,000
|
|
106,686
|
|
Mr. Whitehead
|
977
|
|
|
15,000
|
|
|
—
|
|
|
81,021
|
|
15,000
|
|
111,998
|
|
Mr. Wagner
|
977
|
|
|
15,000
|
|
|
—
|
|
|
75,113
|
|
10,000
|
|
101,090
|
|
Mr. Hedgebeth
|
977
|
|
6,720
|
|
—
|
|
|
80,906
|
|
10,000
|
|
98,603
|
|
(a) All regular employees in the United States, including our NEOs, are eligible to receive annual physical and wellness incentives. However, officers may receive an enhanced physical under the executive physical program. This column reflects the average incremental cost of the executive physical program. Due to Health Insurance Portability and Accountability Act confidentiality requirements, we do not disclose actual use of this program by individual officers.
(b) This column reflects reimbursement for professional advice related to tax, estate and financial planning. The maximum annual benefit is $15,000, and reimbursements are attributed to the calendar year in which services are performed. Due to processing delays, the actual amount reimbursed to an officer may exceed $15,000 in a given year.
(c) For Mr. Tillman, this column reflects access to a Company-provided car service. This benefit is offered to Mr. Tillman to allow the efficient use of his time and to provide safe transportation given the demands of his role, including travel, after hours/weekend obligations and extended work hours. We provide access to this benefit because we believe that the cost is outweighed by the convenience, increased safety and efficiency that it offers.
(d) This column reflects amounts contributed by us under the Thrift Plan and related non-qualified deferred compensation plans. See “Post-Employment Benefits” and “Nonqualified Deferred Compensation” for more information about the non-qualified plans.
(e) The amounts shown represent contributions made on behalf of the NEOs for 2020 contributions under our matching gifts programs for universities and approved not-for-profit charities.
MARATHON OIL | EXECUTIVE COMPENSATION 44
|
|
|
GRANTS OF PLAN-BASED AWARDS IN 2020
|
The following table provides information about all plan-based LTI awards (stock options, restricted stock, restricted stock units and performance units) granted to each named executive officer during 2020. The awards listed in the table were granted under the Marathon Oil Corporation 2019 Incentive Compensation Plan, or 2019 Plan, and are described in more detail in “Compensation Discussion and Analysis.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non‑Equity
Incentive Plan Awards(1)
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
|
All Other
Stock Awards:
Number of Shares of Stock or Units(2)
(#)
|
All Other
Option
Awards:
Number of
Securities
Underlying Options
(#)
|
Exercise
or Base
Price of
Option Awards
($)
|
Grant Date
Fair Value
of Stock
and Option Awards(3)
($)
|
Name
|
Type of Award
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Lee M. Tillman
|
Annual Cash Bonus
|
|
567,000
|
|
1,620,000
|
3,240,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/19/2020
|
|
|
|
|
|
237,249
|
|
439,350
|
878,700
|
|
|
|
|
4,375,926
|
|
|
Stock Options
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
|
479,166
|
10.47
|
1,830,414
|
|
|
Restricted Stock Units
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
263,610
|
|
|
2,759,997
|
|
T. Mitchell Little
|
Annual Cash Bonus
|
|
178,500
|
|
510,000
|
1,020,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/19/2020
|
|
|
|
|
|
64,470
|
|
119,388
|
238,776
|
|
|
|
|
1,189,104
|
|
|
Stock Options
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
|
130,208
|
10.47
|
497,395
|
|
|
Restricted Stock
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
71,633
|
|
|
749,998
|
|
Dane E. Whitehead
|
Annual Cash Bonus
|
|
174,753
|
|
499,293
|
998,586
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
02/19/2020
|
|
|
|
|
|
64,470
|
|
119,388
|
238,776
|
|
|
|
|
1,189,104
|
|
|
Stock Options
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
|
130,208
|
10.47
|
497,395
|
|
|
Restricted Stock Units
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
71,633
|
|
|
749,998
|
|
Patrick J. Wagner
|
Annual Cash Bonus
|
|
148,750
|
|
425,000
|
850,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/19/2020
|
|
|
|
|
|
51,575
|
|
95,510
|
191,020
|
|
|
|
|
951,280
|
|
|
Stock Options
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
|
104,166
|
10.47
|
397,914
|
|
|
Restricted Stock
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
57,306
|
|
|
599,994
|
|
Reginald D. Hedgebeth
|
Annual Cash Bonus
|
|
171,063
|
|
488,750
|
977,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Units
|
02/19/2020
|
|
|
|
|
|
46,418
|
|
85,959
|
171,918
|
|
|
|
|
856,152
|
|
|
Stock Options
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
|
93,750
|
10.47
|
358,125
|
|
|
Restricted Stock
|
02/19/2020
|
|
|
|
|
|
|
|
|
|
|
51,575
|
|
|
539,990
|
|
(1) This column shows potential payout opportunity established for the 2020 performance period under the Company’s Annual Cash Bonus Program. The actual amounts paid to each NEO under the program for 2020 are disclosed in the Summary Compensation Table.
(2) Performance units, restricted stock and restricted stock units, discussed under “Long-Term Incentive Awards,” are denominated as an equivalent of one share of our common stock and, if earned, are paid in stock.
(3) The amounts shown in this column reflect the total grant date fair values of stock options, restricted stock, restricted stock units and performance units calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. The Black-Scholes value used for the stock options granted on February 19, 2020 was $3.82. The value ultimately realized by each NEO upon the actual vesting of the award(s) or exercise of the stock option(s) may or may not be equal to this determined value. Valuation assumptions used in the calculation of these amounts are included in footnote 19 to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2020. See “Long-Term Incentive Awards” for more information about restricted stock, restricted stock units, stock options and performance unit awards.
45 MARATHON OIL | EXECUTIVE COMPENSATION
|
|
|
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END
|
The following table provides information about the unexercised stock options (vested and unvested) and unvested restricted stock and restricted stock units held by each NEO as of December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
|
Number of Securities
Underlying Unexercised Options
|
|
|
|
Restricted Stock/Units
|
Equity Incentive Plan Awards
(Performance Units)
|
|
Name
|
Exercisable
(#)
|
Unexercisable(1)
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (8)
|
Number of
Unearned
Shares, Units
or Other Rights
that Have Not
Vested
(#)
|
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
($) (9)
|
Lee M. Tillman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,886
|
|
—
|
|
|
34.65
|
|
8/15/2023
|
170,455
|
(2)
|
1,136,935
|
|
284,091
|
(5)
|
1,894,887
|
|
|
330,189
|
|
—
|
|
|
34.03
|
|
2/25/2024
|
164,383
|
(3)
|
1,096,435
|
|
273,972
|
(6)
|
1,827,393
|
|
|
256,591
|
|
—
|
|
|
29.06
|
|
2/25/2025
|
263,610
|
(4)
|
1,758,279
|
|
439,350
|
(7)
|
2,930,465
|
|
|
212,000
|
|
—
|
|
|
7.22
|
|
2/24/2026
|
|
|
|
|
|
|
|
|
|
242,473
|
|
—
|
|
|
15.76
|
|
2/22/2027
|
|
|
|
|
|
|
|
|
|
199,276
|
|
|
99,638
|
|
14.52
|
|
2/28/2028
|
|
|
|
|
|
|
|
|
|
90,196
|
|
|
180,392
|
|
16.79
|
|
2/27/2029
|
|
|
|
|
|
|
|
|
|
—
|
|
|
479,166
|
|
10.47
|
|
2/19/2030
|
|
|
|
|
|
|
|
|
T. Mitchell Little
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,947
|
|
—
|
|
|
33.06
|
|
5/25/2021
|
66,002
|
(2)
|
440,233
|
|
86,089
|
(5)
|
574,214
|
|
|
2,309
|
|
—
|
|
|
26.92
|
|
8/31/2021
|
44,669
|
(3)
|
297,942
|
|
74,449
|
(6)
|
496,575
|
|
|
5,009
|
|
—
|
|
|
35.06
|
|
2/28/2022
|
71,633
|
(4)
|
477,792
|
|
119,388
|
(7)
|
796,318
|
|
|
33,700
|
|
—
|
|
|
32.86
|
|
2/26/2023
|
|
|
|
|
|
|
|
|
|
56,604
|
|
—
|
|
|
34.03
|
|
2/25/2024
|
|
|
|
|
|
|
|
|
|
70,299
|
|
—
|
|
|
29.06
|
|
2/25/2025
|
|
|
|
|
|
|
|
|
|
58,667
|
|
—
|
|
|
7.22
|
|
2/24/2026
|
|
|
|
|
|
|
|
|
|
79,240
|
|
—
|
|
|
15.76
|
|
2/22/2027
|
|
|
|
|
|
|
|
|
|
60,386
|
|
30,194
|
|
14.52
|
|
2/28/2028
|
|
|
|
|
|
|
|
|
|
24,509
|
|
49,020
|
|
16.79
|
|
2/27/2029
|
|
|
|
|
|
|
|
|
|
—
|
|
|
130,208
|
|
10.47
|
|
2/19/2030
|
|
|
|
|
|
|
|
|
Dane E. Whitehead
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,971
|
|
—
|
|
16.28
|
|
|
3/7/2027
|
45,455
|
(2)
|
303,185
|
|
75,758
|
(5)
|
505,306
|
|
|
53,140
|
|
26,571
|
|
14.52
|
|
|
2/28/2028
|
42,882
|
(3)
|
286,023
|
|
71,471
|
(6)
|
476,712
|
|
|
23,529
|
|
47,059
|
|
16.79
|
|
|
2/27/2029
|
71,633
|
(4)
|
477,792
|
|
119,388
|
(7)
|
796,318
|
|
|
—
|
|
|
130,208
|
|
10.47
|
|
|
2/19/2030
|
|
|
|
|
|
|
|
|
Patrick J. Wagner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,883
|
|
—
|
|
|
35.91
|
|
5/9/2024
|
47,522
|
(2)
|
316,972
|
|
61,984
|
(5)
|
413,433
|
|
|
35,150
|
|
—
|
|
|
29.06
|
|
2/25/2025
|
35,735
|
(3)
|
238,352
|
|
59,559
|
(6)
|
397,259
|
|
|
26,667
|
|
—
|
|
|
7.22
|
|
2/24/2026
|
57,306
|
(4)
|
382,231
|
|
95,510
|
(7)
|
637,052
|
|
|
31,696
|
|
—
|
|
|
15.76
|
|
2/22/2027
|
|
|
|
|
|
|
|
|
|
43,478
|
|
21,740
|
|
14.52
|
|
2/28/2028
|
|
|
|
|
|
|
|
|
|
19,607
|
|
39,216
|
|
16.79
|
|
2/27/2029
|
|
|
|
|
|
|
|
|
|
—
|
|
|
104,166
|
|
|
10.47
|
|
2/19/2030
|
|
|
|
|
|
|
|
|
Reginald D. Hedgebeth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,449
|
|
—
|
|
15.31
|
|
4/26/2027
|
33,058
|
(2)
|
220,497
|
|
55,097
|
(5)
|
367,497
|
|
|
38,648
|
|
19,324
|
|
14.52
|
|
2/28/2028
|
30,375
|
(3)
|
202,601
|
|
50,625
|
(6)
|
337,669
|
|
|
16,666
|
|
33,334
|
|
16.79
|
|
2/27/2029
|
51,575
|
(4)
|
344,005
|
|
85,959
|
(7)
|
573,347
|
|
|
—
|
|
|
93,750
|
|
10.47
|
|
|
2/19/2030
|
|
|
|
|
|
|
|
|
MARATHON OIL | EXECUTIVE COMPENSATION 46
(1) All stock options listed in this column vest in one-third increments on each anniversary of the grant date, and expire 10 years from the date of grant.
(2) Shares of restricted stock vest, subject to certain exceptions, in February 2021.
(3) Shares of restricted stock vest, subject to certain exceptions, in February 2022.
(4) Shares of restricted stock/units vest, subject to certain exceptions, in February 2023.
(5) Share-based performance units granted in 2018 and have a performance period of January 1, 2018 to December 31, 2020. Awards are reflected assuming target performance.
(6) Share-based performance units granted in 2019 and have a performance period of January 1, 2019 to December 31, 2021. Awards are reflected assuming target performance.
(7) Share-based performance units granted in 2020 and have a performance period of January 1, 2020 to December 31, 2022. Awards are reflected assuming target performance.
(8) This column reflects the value of unvested restricted stock/units held by each NEO on December 31, 2020, using a December 31, 2020 closing stock price of $6.67.
(9) This column reflects the value of awards under our performance unit program based on target performance, using a December 31, 2020 closing stock price of $6.67. These estimated payouts are not necessarily indicative of actual payout at the end of the performance period.
|
|
|
OPTION EXERCISES AND STOCK VESTED IN 2020
|
The following table provides information about the value realized by the NEOs on option award exercises and stock vesting during 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Number of Shares
Acquired on
Exercise
(#)
|
Value Realized on
Exercise(1)
($)
|
Number of Shares
Acquired on
Vesting(2)
(#)
|
Value Realized on
Vesting(3)
($)
|
Lee M. Tillman
|
—
|
—
|
355,608
|
4,413,095
|
T. Mitchell Little
|
—
|
—
|
130,561
|
1,561,004
|
Dane E. Whitehead
|
—
|
—
|
148,752
|
1,214,294
|
Patrick J. Wagner
|
—
|
—
|
56,816
|
662,419
|
Reginald D. Hedgebeth
|
—
|
—
|
25,610
|
126,257
|
(1) This column reflects the actual pre-tax income realized by NEOs upon exercise of stock options, which, in each case, is the fair market value of the shares on the exercise date less the grant price.
(2) Included in this column are the vesting of restricted stock, as well as the following vested performance units that were settled in cash: for Mr. Tillman, 222,255; for Mr. Little, 72,633; for Mr. Whitehead, 63,917; and for Mr. Wagner, 29,053.
(3) Calculated based on the fair market value of the shares on the vesting date and includes the following cash payments for dividend equivalents on vested performance units: for Mr. Tillman, $133,353; for Mr. Little, $43,580; for Mr. Whitehead, $38,350; and for Mr. Wagner, $17,432.
Marathon Oil offers NEOs the opportunity to save for retirement as follows:
» Marathon Oil Company Thrift Plan, or Thrift Plan: a tax-qualified 401(k) plan that currently provides for company matching contributions of up to 7% of eligible earnings.
» Retirement Plan of Marathon Oil Company, or Retirement Plan: a tax qualified defined benefit pension plan.
» Marathon Oil Company Excess Benefit Plan, or Excess Plan: a nonqualified plan. The defined benefit portion allows participants to accrue benefits above the defined benefit tax limits, and the defined contribution portion allows participants to accrue benefits above the defined contribution tax limits.
47 MARATHON OIL | EXECUTIVE COMPENSATION
» Marathon Oil Company Deferred Compensation Plan, or Deferred Compensation Plan: a nonqualified plan allowing participants to defer a portion of their compensation and accrue benefits above the Thrift Plan tax limits.
All plans have a three-year vesting requirement for company contributions. All NEOs have met the vesting requirement.
See “Nonqualified Deferred Compensation” below for additional information on the Deferred Compensation Plan and the defined contribution portion of the Excess Plan.
Retirement Plan
In general, all regular full-time and part-time employees in the United States are eligible to participate in the Retirement Plan as of their date of hire.
Benefit accruals are determined under a cash-balance formula, under which plan participants receive pay credits each year equal to a percentage of eligible compensation based on their plan points. Plan points equal the sum of a participant’s age and cash-balance service. Participants with fewer than 50 points receive a 7% pay credit percentage; participants with 50 to 69 points receive a 9% pay credit percentage; and participants with 70 or more points receive an 11% pay credit percentage. Participants are also credited with interest at a rate based on the 30-year Treasury rate with a 3.00% minimum, which in 2020 was 3%.
For 2020, Mr. Little received a pay credit equal to 11% of eligible compensation. Messrs. Tillman, Whitehead, Wagner and Hedgebeth received pay credits equal to 9% of eligible compensation.
Participants who began employment prior to January 1, 2010 also have a portion of their benefit calculated under a legacy final average pay formula, which is referred to as the Legacy formula. Mr. Little is the only NEO with a Legacy benefit. Up to 37.5 years of participation may be recognized under the formula, and only service earned prior to January 1, 2010 is recognized. Eligible earnings under the Retirement Plan primarily include base salary and annual cash bonuses (including Thrift Plan deferrals but excluding amounts deferred under our nonqualified Deferred Compensation Plan). LTI compensation is not included. Final average pay was frozen as of July 6, 2015, but vesting service and age continue to be updated under the Legacy formula.
The monthly benefit under the Legacy formula is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
|
1.6%
|
x
|
Final Average Pay
|
x
|
Years of Participation
|
]
|
-
|
[
|
1.33%
|
x
|
Estimated Primary SS Benefit
|
x
|
Years of Participation
|
]
|
Normal retirement age under the Retirement Plan is age 65. However, retirement-eligible participants are able to retire and receive an unreduced benefit under the Legacy formula upon reaching age 62. Retirement Plan benefits include various annuity options and a lump sum distribution option. Participants are eligible for early retirement subsidies under the Legacy formula upon reaching age 50 and completing ten years of vesting service. Mr. Little is eligible for early retirement subsidies.
We have not granted years of service in addition to the service recognized under the terms of our qualified retirement plans (applicable to a broad-based group of employees) to any NEO for purposes of retirement benefit accruals.
Excess Plan - Defined Benefit Portion
The Excess Plan for certain highly compensated employees, including our NEOs, provides benefits that participants would have received under our tax-qualified Retirement Plan but for certain Internal Revenue Code limitations. Eligible compensation under the Excess Plan includes deferred compensation contributions made by NEOs. The Excess Plan also provides an enhancement for officers based on the three highest bonuses earned during their last ten years of employment, instead of the consecutive bonus formula in place for non-officers. Distributions under the Excess Plan are paid in a lump sum following separation from service.
MARATHON OIL | EXECUTIVE COMPENSATION 48
Pension Benefits Table
The following table shows the actuarial present value of accumulated benefits payable to each NEO under the Retirement Plan and the defined benefit portion of the Excess Plan as of December 31, 2020. These values have been determined using actuarial assumptions consistent with those used in our financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Plan Name
|
Number of Years of Credited Service (1)
(#)
|
Present Value of Accumulated Benefit (2)
($)
|
Payments During Last Fiscal Year
($)
|
Lee M. Tillman
|
Retirement Plan
|
7.42
|
|
|
218,252
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
7.42
|
|
|
1,776,171
|
|
—
|
|
|
T. Mitchell Little
|
Retirement Plan
|
34.00
|
|
1,801,112
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
34.00
|
|
4,877,543
|
|
—
|
|
|
Dane E. Whitehead
|
Retirement Plan
|
3.83
|
|
|
106,077
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
3.83
|
|
|
279,220
|
|
—
|
|
|
Patrick J. Wagner
|
Retirement Plan
|
6.75
|
|
191,492
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
6.75
|
|
397,116
|
|
—
|
|
|
Reginald D. Hedgebeth
|
Retirement Plan
|
3.75
|
|
|
106,364
|
|
—
|
|
|
|
Marathon Oil Company Excess Benefit Plan
|
3.75
|
|
|
240,438
|
|
—
|
|
|
(1) Represents the number of years the NEO has participated in the plan. However, Plan Participation Service, used to calculate each participant’s benefit under the Legacy formula, was frozen as of December 31, 2009.
(2) Assuming a discount rate of 2.52%, a lump sum interest rate of 0.02%, the RP2000 combined healthy mortality table weighted 75% male and 25% female, a lump sum election rate of 100% for the non‑qualified plan and 90% for the qualified plan, and retirement at age 62 or the age at measurement date, if older.
|
|
|
NONQUALIFIED DEFERRED COMPENSATION
|
We offer certain employees, including our NEOs, the opportunity to accrue benefits equal to the Company matching contributions they would have received under the Thrift Plan but for certain Internal Revenue Code limitations. Officers generally accrue these benefits in the Deferred Compensation Plan, while other employees accrue such benefits in the defined contribution portion of the Excess Plan. Both plans have a three-year vesting requirement for Company contributions. All NEOs have met the vesting requirement. Distributions from the Deferred Compensation Plan and the Excess Plan are paid as a lump sum following separation from service.
Deferred Compensation Plan
The Deferred Compensation Plan is an unfunded, nonqualified plan into which a participant may elect to defer up to 20% of his or her eligible compensation each year. Messrs. Wagner and Hedgebeth elected to defer compensation for 2020. Participants are fully vested in their own deferrals under the plan. Additionally, participants can receive company contributions into the plan equal to the maximum potential matching contribution under the Thrift Plan after they have reached defined contribution accruals under the Thrift Plan in excess of tax limits.
The investment options available under the Deferred Compensation Plan generally mirror the core investment options available under the Thrift Plan.
49 MARATHON OIL | EXECUTIVE COMPENSATION
Excess Plan - Defined Contribution Portion
Prior to becoming eligible for participation in the Deferred Compensation Plan, NEOs may have received defined contribution accruals under the Excess Plan. These contributions were available after a participant’s Thrift Plan contributions were limited due to tax requirements and equaled the matching contribution that participants would have received under the Thrift Plan but for limits imposed by tax law. Defined contribution accruals in the Excess Plan are credited with interest equal to that paid in the “Managed Income Portfolio II” option of the Marathon Oil Company Thrift Plan. The annual rate of return on this option for 2020 was 2.02%.
Nonqualified Deferred Compensation Table
The following table shows each NEO’s accumulated benefits under our Deferred Compensation Plan for 2020; the NEOs had no accumulated benefits under the defined contribution portion of our Excess Plan for 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Plan Name
|
Executive
Contributions
in Last Fiscal
Year
($)
|
Registrant
Contributions
in Last Fiscal
Year(1)
($)
|
Aggregate
Earnings
in Last
Fiscal Year
($)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance at
Last Fiscal
Year End
($)
|
Lee M. Tillman
|
Deferred Compensation
|
—
|
|
|
197,868
|
|
326,805
|
|
|
—
|
|
|
1,912,121
|
|
T. Mitchell Little
|
Deferred Compensation
|
—
|
|
|
63,759
|
|
12,312
|
|
—
|
|
|
648,104
|
|
Dane E. Whitehead
|
Deferred Compensation
|
—
|
|
|
61,071
|
|
33,692
|
|
|
—
|
|
|
253,266
|
|
Patrick J. Wagner
|
Deferred Compensation
|
107,304
|
|
(2)
|
55,701
|
|
235,919
|
|
—
|
|
|
1,281,406
|
|
Reginald D. Hedgebeth
|
Deferred Compensation
|
115,580
|
|
(2)
|
61,575
|
|
66,031
|
|
|
—
|
|
|
445,962
|
|
(1) The amounts shown in this column are also included in the “All Other Compensation” column of the Summary Compensation Table.
(2) Reflects elective 2020 salary deferrals under the plan and, for Messrs. Wagner and Hedgebeth, also includes a 2019 bonus deferral amount that was paid in 2020.
|
|
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
As a matter of policy, we do not enter into employment, severance or change in control agreements with our NEOs. Rather, we provide a Marathon Oil Corporation Officer Change in Control Severance Benefits Plan (Change in Control Plan), which is described in more detail below.
Retirement or Separation
Upon retirement or separation, our NEOs are entitled to receive their vested benefits that have accrued under our broad-based and executive benefit programs. For more information, see “Post-Employment Benefits” and “Nonqualified Deferred Compensation.”
Unvested outstanding equity awards generally forfeit upon a separation from service. Certain of our outstanding equity awards include limited exceptions in connection with retirement. If a NEO retires, unvested restricted stock awards are forfeited, except in the case of mandatory retirement (age 65). Unvested restricted stock unit awards will continue to vest based on the original vesting date if a NEO is at least age 60 with five years of service upon separation from service and certain additional requirements are met. Unvested stock options granted prior to 2019 forfeit upon retirement; all other unvested stock options vest if a NEO is at least age 60 with five years of service upon separation from service and certain additional requirements are met. Unvested performance units are forfeited upon a separation from service unless a NEO is at least age 50 with
MARATHON OIL | EXECUTIVE COMPENSATION 50
ten years of service, has worked at least half of the performance period and meets certain other requirements, in which case awards may be vested on a prorated basis at the Committee’s discretion. Mr. Little was the only NEO who met the retirement vesting criteria for certain awards.
Death or Disability
In the event of death or disability, our NEOs (or the beneficiary or estate, as defined by the plan terms) would be entitled to vested benefits accrued under our broad-based and executive benefits programs. LTI awards would immediately vest in full upon the death of an NEO, with performance units vesting at the target level. In the event of disability, LTI awards would generally continue to vest as if the NEO remained actively employed during the period of disability (meaning the NEO has been determined to be disabled under the Company’s long-term disability plan or can provide proof of a Social Security determination of disability). However, for restricted stock/restricted stock units and stock options granted in 2019 and later, upon termination of employment not for cause while during a period of disability, the awards will immediately vest in full.
Change in Control
To encourage our NEOs to continue their dedication to their assigned duties where a change in control of the Company is under consideration, our Change in Control Plan provides severance benefits if employment is terminated under certain circumstances generally following a change in control.
Under the Change in Control Plan, a change in control generally will have occurred if:
» Any person not affiliated with Marathon Oil acquires 20% or more of the voting power of our outstanding securities;
» Our Board no longer has a majority comprised of (1) individuals who were directors on the effective date of the plan and (2) new directors (other than directors who join our Board in connection with an election contest) approved by two-thirds of the directors then in office who (a) were directors on the effective date of the plan or (b) were themselves previously approved by our Board in this manner;
» We merge with another company and, as a result, our stockholders hold less than 50% of the surviving entity’s voting power immediately after the transaction;
» Our stockholders approve a plan of complete liquidation of Marathon Oil; or
» We sell all or substantially all of our assets.
If an NEO was terminated in 2020 without cause or resigned for good reason following a change in control (or prior to a change in control if the NEO reasonably demonstrates that such termination of employment was at the request of actions by a third party who has taken steps reasonably calculated to effect a change in control), he or she would be entitled to the following:
» a cash payment of up to three times the sum of (1) the NEO’s base salary (as in effect immediately prior to the occurrence of the circumstances giving rise to the termination from employment or, if higher, immediately prior to the change in control) and (2) the average bonus awarded to the NEO in the three years before the termination from employment or, if higher, before the change in control;
» a cash payment equal to the NEO’s annual bonus at target level multiplied by a fraction equal to the number of days in the bonus calculation year during which the NEO was employed divided by 365; and
» a cash payment equal to eighteen times the monthly COBRA premium in effect at the NEO’s termination from employment for the level of coverage in which the NEO participated immediately prior to his or her termination from employment.
These benefits are not payable if the termination is for cause (as defined in the Change in Control Plan) or due to mandatory retirement, death, disability or resignation (other than for good reason, as defined in the Change in Control Plan) by the NEO.
The program includes no provisions to reimburse or “gross up” tax obligations following a change in control.
51 MARATHON OIL | EXECUTIVE COMPENSATION
If a change in control occurs prior to the end of a performance period, unvested performance units granted in and prior to 2020 will vest at the applicable performance percentage based on Marathon Oil’s actual relative TSR ending on the last regular trading day immediately prior to the date of the change of control.
Accelerated vesting of restricted stock, restricted stock units and stock options will occur generally only if an NEO is involuntarily terminated within the two years following a change in control.
The Change in Control Plan will continue in effect for two years after a change in control.
The following tables assume a termination date or change in control date of December 31, 2020, the last business day of 2020, based on Change in Control Plan terms in effect as of that date. The value of the equity awards (accelerated vesting of restricted stock awards, stock options and performance unit awards) was calculated using the December 31, 2020 closing market price for our common stock $6.67 and based on a performance period ending December 31, 2020. The value of performance unit awards assumes that the 2018 Performance Units would vest and be paid out at 100% (based on the negative TSR provision in the award that caps vesting at target) and the 2019 and 2020 Performance Units would vest and be paid out at 0% and 60%, respectively. Messrs. Little and Hedgebeth were no longer employed after December 31, 2020 and therefore are no longer eligible for payouts under the Change in Control Plan.
Payments Upon a Change in Control without Termination of Employment
|
|
|
|
|
|
|
|
|
Name
|
Accelerated Vesting of LTI
($)
|
Lee M. Tillman
|
3,653,166
|
|
T. Mitchell Little
|
1,052,005
|
|
Dane E. Whitehead
|
983,097
|
|
Patrick J. Wagner
|
795,664
|
|
Reginald D. Hedgebeth
|
711,505
|
|
Payments Upon a Change in Control Followed by Termination of Employment with Good Reason or by the Company without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Accelerated
Vesting of LTI(1)
($)
|
Severance
Payment (2) ($)
|
Welfare Benefits(3)
($)
|
Total
Payments
($)
|
Lee M. Tillman
|
7,644,814
|
|
10,908,000
|
|
36,184
|
|
18,588,998
|
|
T. Mitchell Little
|
2,267,973
|
|
|
4,273,500
|
|
|
36,184
|
|
|
6,577,657
|
|
Dane E. Whitehead
|
2,050,097
|
|
|
4,104,314
|
|
|
36,184
|
|
|
6,190,595
|
|
Patrick J. Wagner
|
1,733,219
|
|
3,637,751
|
|
36,184
|
|
5,407,154
|
|
Reginald D. Hedgebeth
|
1,478,608
|
|
3,909,728
|
|
36,184
|
|
5,424,520
|
|
(1) Reflects the accelerated vesting of LTI only in a “double-trigger vesting change in control” event, i.e., an event in which the executive’s employment is involuntarily terminated after a change in control. Restricted Stock/Restricted Stock Units and Stock Options only receive accelerated vesting in the event of a double-trigger change in control.
(2) Severance payments were calculated without regard to the temporary 2020 base pay reductions.
(3) Reflects an amount equal to 18 months multiplied by the monthly COBRA premium in effect at the NEO’s date of separation from service for the level of coverage in which the NEO participated immediately prior to the date of separation from service.
MARATHON OIL | EXECUTIVE COMPENSATION 52
We are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Tillman, our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner that is consistent with applicable law, regulatory and other guidance.
For our last completed fiscal year, the annual total compensation for our median employee was $132,820. The annual total compensation of our CEO, as reported in the Summary Compensation Table, was $12,063,718. Thus, we estimate that our CEO’s compensation was 91 times the median of the annual total compensation for all of our employees.
|
|
|
METHODOLOGY USED TO IDENTIFY MEDIAN EMPLOYEE
|
To identify the annual total compensation for all of our employees for purposes of identifying our median employee, we selected October 1, 2020, as our measurement date to allow sufficient time to gather data from the two main payroll systems we use, which are located in the United States and Equatorial Guinea.
The majority of our employees are on our United States payroll, and the compensation used for employees on the United States payroll is compensation that would be reflected in Box 5 of Form W-2 for the period from January 1, 2020 to September 30, 2020.
The compensation used for employees on the Equatorial Guinea payroll reflects pay from December 16, 2019 through September 15, 2020 and includes basic pay, absence pay, overtime amounts, offshore premiums and shift differential payments, as well as annual cash bonus amounts paid on March 15, 2020, and October bonus amounts paid on October 12, 2020. These October bonus amounts were included because they reflect work done prior to October 1, and their inclusion provides Equatorial Guinea payroll information that is more consistent with the measures used for the United States payroll.
These measures of compensation were selected based on our view that each measure provides a reasonable estimate of the comprehensive compensation payments to our employees on each of the relevant payrolls. Taken in the aggregate, we believe this data provides a reasonable estimate of the annual total compensation of all employees of Marathon Oil Corporation and its consolidated subsidiaries.
As of October 1, 2020, our total employee population consisted of 1,732 employees working at Marathon Oil Corporation and its consolidated subsidiaries, which includes all full-time, part-time and seasonal or temporary employees. Of this total, 1,273 were United States payroll employees, which includes our United States payroll expatriate employees, and 459 were Equatorial Guinea payroll employees.
Using this methodology, we determined that our median employee was a salaried, full-time employee working in the United States.
53 MARATHON OIL | CEO PAY RATIO
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TRANSACTIONS WITH RELATED PERSONS
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We have written procedures for monitoring, reviewing, approving or ratifying related person transactions. We will enter into or ratify related person transactions only when our Board, acting through the Corporate Governance and Nominating Committee, determines that the related person transaction is in the best interests of the Company and its stockholders. The primary features of these procedures are:
» Each director and executive officer must submit a list of his or her immediate family members, each listed individual’s employer and job title, each firm, corporation or other entity in which such individual is a director, executive officer, partner or principal or in a similar position or in which such person has a five percent or greater beneficial ownership interest, and any profit, non-profit charitable or trade organization for which such individual is actively involved in fundraising or otherwise serves as a director, trustee or in a similar capacity.
» The Company maintains a list, to the extent the information is publicly available, of five percent beneficial owners and certain information regarding such five percent beneficial owners, including if the owner is an individual, the same information requested of directors and executive officers as noted above.
» Any related person proposed transaction that involve an amount in excess of $120,000 is submitted to the Corporate Governance and Nominating Committee or the Board at the next regularly scheduled meeting or, in certain cases, to the Committee Chair or other uninterested member of the Corporate Governance and Nominating Committee delegated authority to act on such matters. The facts and circumstances of each proposed related person transaction are reviewed and considered, and a determination is made regarding whether to approve it.
» Additionally, the Company’s accounts payable and accounts receivable produce quarterly reports of any amounts paid or payable to, or received or receivable from, any related person identified in the lists mentioned above, which are reviewed internally to determine if there are any related person transactions that were not previously approved or ratified. If any such transaction is identified based on this review, it is promptly submitted to the Corporate Governance and Nominating Committee, Committee Chair or other member of the Corporate Governance and Nominating Committee, as appropriate, which reviews the transaction and considers all of the relevant facts and circumstances and a determination is made regarding ratification, modification or termination of the identified transaction. If any such transaction is identified, Internal Audit will perform an evaluation of the Company’s controls and procedures.
» The Corporate Governance and Nominating Committee annually reviews any previously approved or ratified related person transaction with a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000. Based on all relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the Corporate Governance and Nominating Committee determines whether it is in the best interests of the Company and its stockholders to continue, modify or terminate the transaction.
During 2020, there were no transactions in excess of $120,000 between the Company and a related person in which the related person had a direct or indirect material interest.
MARATHON OIL | TRANSACTIONS WITH RELATED PERSONS 54